Are you ready for online banking? If you’re a fan of “virtual” accounts, you’re not alone — according to an American Bankers Association survey, two-thirds of Americans use online banking more often than visiting a local branch. And a number of consumers are choosing to open accounts with online-only access.
The reasons for opening an online account are numerous. After all, you have the convenience of being able to manage your account from wherever you have an internet connection or can use your cellphone data.
Plus, you’ll find that interest rates on checking and savings accounts can be higher than what you’ll find at a brick-and-mortar bank. That’s because the online banking industry is hot and competitive!
Clearly, gone are the days of standing in line at the bank (and getting free lollipops, but oh well). But if you want to open an account in this brave new world of banking, where do you begin?
Let’s take a look at how to open an online bank account. I’ll walk you through it step by step and let you know what you’ll need to begin.
Step 1: Choose a Bank
“Yeah, duh,” you say. But even though this step is a bit of a no-brainer, trust me; choosing the right bank for you isn’t necessarily an easy task.
Do you want to open a checking or a savings account? Do you want to have the option of going into a branch office when you really need help? Do you want a bank that offers checking and savings accounts? Would you like to invest in a CD or money market account with the same institution?
To help you choose the best bank for your needs, we here at Investor Junkie have published in-depth reviews of some of the biggest online banks out there.
Our recommended pick is Ally Bank, but be sure to read all of the reviews and do your due diligence.
Also, be sure that you clearly understand the fee situation. Many online banks now charge zero maintenance fees, but make sure you’re not going to be nickel-and-dimed with extra charges for using ATMs, receiving printed statements, etc.
However, there’s one thing I like to stress when people are searching for a bank: Make sure you go with an FDIC-insured account. This means that each of your accounts will be insured for up to $250,000 in case of bank failure.
Step 2: Get Your Info Together
Setting up an online bank account is easy, but you’re still going to need to supply some information about yourself. (If you’re concerned about the safety of your information online, a factor to consider is whether or not your bank uses two-factor authentication for accessing accounts. This is something we at Investor Junkie take note of in reviews.)
Here’s the basic information you’ll need to enter:
- Your full name
- Your Social Security number
- Your date of birth — you must be 18 years of age to open a bank account; if you’re younger, talk to your parents or guardians about a custodial account
- The street address of your residence
- Transfer information for your first deposit — this will likely be the routing and account numbers from your current bank
Step 3: Fill Out an Application
Now you’ll have to go to the website of the bank of your choice and apply for an account! The application process should take only a couple of minutes. You should know that it’s likely the bank will run a credit check. You may also be asked some “out-of-wallet” questions to verify your identity — for example, your mother’s maiden name or information that relates to an account in your credit report.
If you’re finding the application process tricky, many online banks are happy to help via live chat or a phone representative.
Step 4: Make Your First Deposit
Once your account is approved, it’s time to fund it!
If you’ve already got an existing account at another bank, all you have to do is transfer money into your new account using the bank’s routing and account numbers. However, be aware that your original bank may charge you a fee for this.
If this is your first account, contact the bank about how to make your initial deposit. You may have to take a picture of a check to deposit using a smartphone app or mail in a paper check.
Step 5: Go Out With the Old and in With the New
If it’s your plan, once you have your new account up and running, you’ll want to cancel your old bank account. However, before you do that, make sure you’ve taken the following steps, if applicable:
- Contact your employer to set up your new account with direct deposit
- Update every automatic bill pay account you have
- Update automatic transfer accounts — these may include some account you haven’t thought about, such as PayPal
- Destroy all of your old paper checks
Have you switched over to an all-online account? Let us know how the setup process went!