As of 2019, about 57 million people in the U.S. have chosen an online bank instead of a brick-and-mortar bank with physical branches. If you’ve never thought about opening a bank account online, you may be missing out on a number of advantages that your local brick-and-mortar bank doesn’t offer.
Online banking is convenient and may help save you some time during your busy days. You’ll never wait in line, your accounts are available to you 24/7, and because many banks now offer apps, you can view your accounts from your phone, your tablet or computer. There’s also the added convenience of paying your bills online through the bank’s website, and the ability to transfer money between accounts. In fact, there are money apps that automatically sync with your online banking information so you can stay up-to-date while on the go.
A Step-by-step Guide to Opening an Online Bank Account
1. Collect all personal information.
Banks, by law, are required to verify your identity. You’ll need a driver’s license number or another form of state-issued ID. You’ll also need your social security number or card. In some cases, the bank will only ask for identification numbers. In other cases, you may need to scan your documents in order to submit them on your application. Your bank should identify what you’ll need.
2. Choose an online bank.
Before you can start banking online, you have to choose a bank. If you’re happy with your current bank, that’s a good place to start. Inquire if they offer online banking, and if so, what options they offer. If you choose to stay with your current bank, you won’t have to gather all of your information together and open a new account.
But let’s say your current bank doesn’t offer online banking. Well, you’ll need to find an online bank that meets your needs and wants. Perhaps you’d like a banking app so you can easily access all of your accounts, or maybe you rely on great online customer service. Whatever it is, make sure the bank your considering offers it before you open an account.
3. What types of accounts do you need?
How you plan to use or save your money will determine what types of bank accounts you need. Many banks require that you open a savings account. If you choose a credit union, you’ll often need to deposit a small amount into a savings account first to establish membership before opening any other accounts.
If you plan to use your new online bank as your primary bank for all your financial needs, you should also consider opening a checking account. If you want to save your money in an account that earns a higher rate of interest than a savings account and you don’t readily need access to that money, you may want a look into a CD (certificate of deposit) or a money market account.
4. Fill out your application.
Once you’ve decided which accounts you need, you will need to fill out an application to actually apply for these accounts. The documents you compiled earlier, along with your contact information, is generally all you’ll need to complete this step. However, some banks may require a signature page. If so, you will be mailed or emailed a form to fill out and mail in with your signature.
5. Fund your account(s).
The final step to opening an online bank account is depositing money into your account. You can walk into your current brick and mortar bank to complete this step, or you can link your current bank account to the new account by providing the routing and account numbers to your new bank.
It’s not uncommon for some banks to require a small test deposit of $1.00 or less into your account in order to verify you own the account. If this is what the bank needs, you’ll need to report the exact amount of deposits to confirm you’ve linked the two accounts.
Optional step – Setting up a joint bank account
When you add another person to your bank account, it becomes a joint account. What that means is that both parties can deposit and withdrawal money from the account without the other’s consent. There are many reasons why this might be an ideal arrangement, such as when it becomes difficult for an aging parent or grandparent to properly manage their money, write checks or pay bills. Joint accounts are also useful for married couples or for students attending college who may need access to your account every now and then. It’s also a convenient way to deposit funds for their tuition, books and other living expenses. You should be able to open a joint bank account online like you would any other account. Here are the steps you’ll need to take:
- Check with your bank about what documents you’ll need to open the joint account.
- You’ll need to find out if the joint user has any outstanding debt with the bank or credit union. If so, there is a good chance your application will be turned down.
- The person you’re adding to your account will need to prove their identity with a photo ID and social security card. To open the joint account online, the bank may ask that you scan these documents and send them in via a secure server.
- Complete all the paperwork needed to open your joint account. It’s that easy!
What is an Online Bank?
An online bank is just what it sounds like, a bank that allows you to do all of your banking – making deposits, checking balances, transferring funds and paying bills online via the Internet. In fact, Statista reports that 86% of all U.S. banks now offer bill paying online. Most banks are set up to help you manage your money online with all of your mobile devices, tablets, and cell phones, through an app, or on your computer.
Fully online banks, also known as web banking or Internet banking, usually offer higher interest rate returns on savings, CDs and other investments. They save money by not having brick and mortar banks, and thanks to the low overhead, they are inexpensive or free to open an account with, and are often much better for tracking all of your spending. Some banks even allow you to apply for loans and scan the front and back of a check to make a deposit online.
Chances are your current bank offers similar services, even with brick and mortar locations. To access online banking with your current bank, you’ll need to register for your bank’s online banking service, create an account and choose a password. Once you do that, you can use all the services the bank allows.
What are the Benefits to Banking Online?
While physical banks aren’t going anywhere any time soon, there are so many benefits to banking online that if you open an account with one, you may never need to visit a bank again. Aside from being able to access your accounts every day of the week, holidays and even at 3 a.m., online banking allows you to make deposits, track spending, see balances, pay bills, transfer money between accounts and so much more. Some online banks let you set up specific savings goals so that you can track your progress and celebrate your success.
Another benefit to online banking is that they may be a good alternative if you don’t live in close proximity to a physical bank. You can still access your money by connecting your debit card with a mobile app, and if you need to make a payment to a friend or family member, you can transfer money between accounts.
If security is a concern, you should know that all major banks are insured by the FDIC, which means your money is as safe if you bank online as it would be if you visited a bank in person. There are tons of safety measures in place, including secure logins and passwords and suspicious purchases notifications to help protect your money, so you can feel confident your personal information is secure with an online bank.
Most banks and credit unions advise that you take steps to ensure your accounts are safe, including changing passwords frequently, logging in often to monitor activity and not using public Wi-Fi to access your accounts. Online banking has come a long way in the last decade, and because it offers so many benefits, it will, without a doubt, continue to grow by providing customers with added features, robust security measures and time-saving conveniences.