If you have been considering opening an online bank account, you may need some instructions on how to do it. Online banks tend to be the same as traditional banks, but exist on online platforms such as websites and apps. While brick-and-mortar banks usually have many requirements to be able to open an account, online banks are usually simpler. On top of that, online bank accounts can be a smart option for you, since they often offer lower to no fees and higher interest rates. If you need some instructions on how – and why – to open an online bank account, this article can help you.
If you don’t mind not having a branch to go to, there are many benefits that online bank accounts can offer you. Thus, before explaining the steps and requirements to open an online bank account in the United States, here are some of the advantages of this type of bank account.
Low or No Minimum Deposit and Balance.That can depend on the bank, but, more often than not, online banks have very low to no minimum deposit to open an account. In addition, it is rare for online banks to demand minimum balance too, making this type of banking service more accessible and flexible to your needs.
Low or No Bank Fees. It is very rare for an online bank to charge fees, and when they do, these fees tend to be very low. Brick and mortar banks, on the contrary, often have maintenance fees. These traditional banks have costs of keeping physical locations, a cost they often transfer to the client through monthly or annual fees. Unless you meet monthly balance minimums or get lucky with another limited exception, there is no escape from these fees in brick and mortar banks. Therefore, by not having physical branches, online banks are more competitive when it comes to fees.
Higher Interest Rates. For many, the greatest advantage of online bank accounts is definitely the higher interest rates. Here is an example. In a traditional brick and mortar bank, the interest rate you can earn with a savings account will be anywhere from 1% to 1.25% annually. In comparison, a digital savings account can offer rates from 1.80% to 2.25%, which is, on average, 10x higher. On top of that, many online savings accounts offer even higher interest rates than that. Some of these online platforms use different tactics to be able to provide up to 10% interest return. Before you become suspicious, online banks are able to offer much higher interest rates because they don't have all expenses that come with a physical location. There are no branches to maintain, no tellers to pay for, no branch managers or janitorial staff. Without those added expenses, online banks can pass the savings on to customers in the form of higher interest rates.
Easy to Use Apps and Websites. Online banking technology is not the primary operation of brick-and-mortar banks. Due to that, many of their apps and websites are very complicated to navigate. Some have complicated systems to enter your accounts online, confusing user experience, and tend to don't offer all their services through their online platforms. Online banks, on the other side, have online banking technology as their only operation. For online accounts, apps and websites are almost always the only places where customers interact with the bank. Thus, digital savings accounts, and online banks in general, spend a lot of time and capital optimizing these platforms. Usually, you can navigate easily through their apps and websites. Registering, transferring, and handling your money in general, tend to be easy tasks to complete at online bank accounts.
Easy Access. I know you are reading about how to open an online bank account, and there will be an explanation, but what if I told you they are very easy to open and access. Online bank accounts have a great advantage when it comes to accessing them. Opening an account in a traditional brick-and-mortar bank can be very complicated and take a long time. Online bank accounts, on the contrary, are much easier. Generally, you can open a digital bank account in less than 10 minutes. On top of that, you can effortlessly connect with your account from your computer, phone, or tablet with a username and password of your choosing. Your whole banking profile will be available on the app for you to keep control of your finances.
You usually need fewer documents to open an account in an online bank in the United States, if compared to brick-and-mortar banks in America. These documents may differ from state to state, due to the different legislations, as well as from bank to bank. In some online banks, if you are 18, a valid id or social security number is enough to open your account. However, generally, the documents below are the ones you need to open an online bank account:
If you are an immigrant, you may also have to provide any relevant immigration forms, although many online banks don’t have this requirement. If you are under 18, there may also be other demands, such as your parents’ documents and your birth certificate. To make sure you have all the required documents to open your account, you can always check the bank’s website or app. No pressure. Since everything is done online, you can pause your process to look for documents as many times and for as long as you need.
Now that you have all the documents you need in hand, let’s go through the process of opening the account. Often, online banks have very easy-to-navigate apps and websites. Therefore, this process of opening your account tends to be very intuitive, with step-by-step clear instructions. If not, the majority of these companies have online chats or a number to call, in case you need someone to help you. Regardless, there are a few things that may be interesting to know before you start this opening process:
It Is Safe. It is normal to feel a little reluctant to give all your information to an online platform, as well as taking a picture of yourself in it. Don’t worry, if you did your due diligence to make sure the bank is legit; there is no reason to feel insecure. Traditional banks also have access to this information, sometimes even more. Online banks tend to follow the exact same privacy and security rules as traditional banks do. Therefore, you don’t have to worry about it. Asking for your personal information, documents, and a picture of yourself is actually a way to guarantee your security and that no one is falsely opening a bank account in your name.
You Will Use Your Camera. Since you are not face-to-face with the bank’s employee to give your documents and for the person to check your identity, when opening an online account, you will probably – most certainly – have to use your camera a lot. Initially, these banks ask you to take a picture of all your relevant documents that will be used to open your account. Then, to confirm it is actually you, most of them will ask you to take a picture of yourself holding your document. This is a safety measure to simply confirm your identity. Due to that, you should authorize the app or website to have access to your camera.
You Should Check Fees Information. To make sure you are choosing the best online bank for your needs, it can be interesting to check some things beforehand. For example, checking annual fees, minimum balances, and other financial requirements to hold a bank account is a great idea. By doing that, you can either plan to meet them once you’re settled or just choose a bank that doesn’t have these requirements.
Once the account is opened, you can simply link it to your other bank accounts and transfer the desired amount. Some online banks may take a little longer than traditional banks to receive deposits and transfers, so no need to get nervous if it takes a little more time than what you are used to. Then done! Now you can access your bank account easily from your phone, computer, and tablet, and follow all your transactions.
There is not one online bank account that is the best for all. It will ultimately depend on your needs as a customer. First, it can be interesting to understand which kind of account you wish to open. Think about your needs and the goal you have in mind and you will be able to know more clearly if you are interested in opening a checking account, a savings account, a certificate of deposit, or another type of account. Once you know what you are looking for, you can start comparing this service between banks based on your needs and preferences. For example, you can be looking for higher interest rates, so you can compare the interest rates each bank offers. It is all about finding the online bank account that most fits your needs.