Monday, February 14, 2011

Steps to Opening a Deposit Account

This is the 1st post in the Bank Deposit Account 101 series. 

It’s Valentine’s Day! So of course I’m going to bring up the extremely sexy topic of opening up a deposit account! Disagree with the sexiness of the topic? Well, let’s put it this way, a bank account (credit union, too, but for simplification, I’ll refer to everything as “bank”), if used correctly, acts as a tool to accumulate wealth. And money is super sexy. Below are some steps you will (or should) take when opening an account:

Research, Research, Reaserach! 
You can ask around to see what the best bank account is out there, but you must remember to at least look into it a little bit yourself. There are some traits to an account that everyone agrees are good, but there are also some others that have to be assessed on an individual basis. Some examples of these characteristics are: the amount you can put into the account, convenience, and the length of time you plan on keeping an account open. Be sure to consider these features carefully and weigh their importance to you before choosing a bank to open your account in. 

Once you’ve chosen a banking institution, you can proceed to opening an account. For a lot of banks, you’ll have the option of opening an account online or in person. If this is your first time opening a bank account, I suggest that you go to the bank (unless it’s an online bank without physical locations).
This way, you’ll be able to talk to a live person who can answer any of your questions on the spot. S/he can also explain the differences between the accounts and help you choose the banking products you’ll need or want. 

Still, it’s critical that you do your own research before going. Even though representatives of each bank can help you, don’t expect them to put your interest ahead of the bank’s own interest. Don’t let people persuade you into getting products that you don’t need. 

The Paperwork
After you’ve chosen the type of account you want to open and are satisfied with the answers the bank provided to your questions, you’re ready for the paperwork. I know this sounds super boring, but it’s actually pretty quick. 

To start off, you’ll need two forms of identification. Yes, two.  The first time I opened up a bank account on my own (my first was a student account my mom helped me open), it took me by surprise. Ummmm…I have a driver’s license? Is that not enough? Well, that’s the ID they definitely want to see. As long as you present that, the second form of “ID” they want to see is usually pretty lax. It can be a credit card or bank statement from another bank, a bill with your name and address, a pay stub, or even your social security card. Of course, you can also use things that are legally considered IDs such as your birth certificate and passport. 

After your ID’s been checked, you’ll either need to fill out an application yourself, or the account representative will ask you a series of questions to enter into the bank’s system. These questions are usually pretty basic such as your date of birth, social security number, address, and previous address if you’ve moved in the past year. Sometimes the questions may delve deeper and ask for your income and how much you spend a year. These questions are more likely for market research, but the representatives could be required to complete it moving on to the next step. 

Next comes the step in which you fund the account. You can do this by writing a check or transfer money from another bank account into this one. For opening an account online, there will be a set number of days to mail in a check or do an electronic transfer.

The final paperwork should be printed out and signed. Then, you’ll be provided with checks and with information of when your ATM card will arrive if these come with your account. Finally, there’s often an opportunity to set up online account management. Prepare a username that’s easy to remember and a secure password ahead of time. 

Overdraft Protection
Banks are now required to ask for your permission to opt you INTO overdraft protection. Don’t opt in. Overdraft protection just means that your card won’t be denied when you charge more than the balance in your account at that moment. What they usually won’t tell you (until you ask) is that it costs a small fortune to not get denied. If you opt in and overdraw your account, the card will be allowed to go through, but the bank will charge you a $30 to $40 fee for this “service.” People used to be automatically enrolled into overdraft protection. However, in recent years, Congress decided the practice to be borderline predatory, and thus, demanded banking institutions to ask for permission. Being denied can be embarrassing, but spending 40 bucks on a cup of coffee is much, much worse. Just be sure to keep track of spending so you never have to worry about being an overdraft victim. 

Happy Valentine’s Day! Now, go forth and create wealth =)


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