How to Open a Bank Account
- M. Joseph Benric
- Jun 17, 2023
- 6 min read
Updated: Oct 14, 2024
Life, Money and Gratitude #8 How to Open a Bank Account
It's called a bank
"Your" Money
Once you decide that you want a bank account, there’s a few things you need to know. The bank requires a few things, and the government has a requirement.
For the bank, you’re going to need some money and identification. The money is to make your first deposit. The identification is to set up your account so that no one else can use it and verify that you are who you say you are.
You wouldn’t want someone else to have access to “your” money. I put the word “your” in quotations because it’s really not your money anymore, your deposit becomes the banks money. The bank agrees to give it back to you at a later date on demand, but while it’s in their bank they own it and get to use it, mostly for loans.
Most banks are covered by the FDIC (Federal Deposit Insurance Corporation), which will insure your money up to $250,000. Make sure the bank you pick has this. If the bank fails, which occasionally happens, your money will be insured.
The money in your account has now entered something called Fractional Reserve Banking this allows the bank, indirectly, to print money. WHAT?! You didn’t know they did that did that, yup, they do. (More about this in a latter issue.)
If you also get a savings account, the bank will share a tiny fraction of the money they make on your deposit with you. This is done through an interest payment. Interest is a powerful tool, but the banks don’t give you much. For example, if you deposited $100 into “your” savings account and the bank is paying 1% interest, at the end of a year you’ll have earned $1, this will be added to your savings account which will show that you have $101 on your ledger.
Well, I’ve covered what you need to open a bank account and briefly described how bank accounts work, let’s move onto the government.
Ahhh, The government, it has a special requirement called KYC (Know Your Client). This is where the bank collects a bunch of information about you and gives it to the government. The government wants to know, who you are, how much money you have, and where you are spending your money. Somehow KYC is supposed to protect the law abiding citizens from bad actors and criminals. Anytime you make a transaction over $600 they (the government) want to know about it. Be aware that the government is monitoring your transactions, probably not a surprise to you.
To summarize, it’s actually really easy to get a bank account and they’re pretty useful to have. You fill out an application, deposit some money, and “Presto” like magic you’re part of modern day banking. The things going on in the background of your account will not be noticeable to you, but you should know the basics of how a bank account works as well as what banks do with “your” money.
Where Did The Smiles Go?
Let's go back to 1990.
I have just received an application for a bank account and credit card from the wonderful smiling people (salesman) who visited my college to hand out swag and sign up freshman for bank accounts.
I’m feeling pretty good about myself, I’ve just done some adulting.
The bank rep, still smiling at me, says,
“We’ve gotta get you over to the branch and get your account open.”
“I’ll make an appointment for you, are you available either Tuesday or Wednesday after school?” (good sales technique, using the “either” “or” method)
“Wednesday afternoon works for me”, I say.
“Wonderful” says the bank rep, still smiling “3:00 pm on Wednesday, here is the address, thanks for stopping by” she says, as she hands me a business card and shakes my hand, putting on an even bigger smile. (She just made a commission for opening a bank account.)
I nod my head and smile back as I start walking back to my dorm room.
I’m thinking to myself, look at me, big man on campus, I’ve got an appointment at the bank.
I still don’t know anything about bank accounts and I still don’t know anything about credit cards. All I do know is that I still want them.
On Wednesday at 2:55 pm, I’ve always been prompt I consider it a sign of respect, I enter the bank branch where a polite but stern looking fellow tells me to take a seat and he’ll be with me in a minute.
Ok.
I take a seat and look around it’s a typical bank, people standing in line, tellers behind tall counters and florescent lights.
The little that I do know about banks is, it’s a place where you put your money. My father had me deposit some checks for him a few times, probably because he didn’t want to stand in line, and that was all I new about banks.
At this time the banker calls me over to his desk, a large cubicle off to the side and tells me to sit down.
It’s all business now.
Hmmm, I think to myself, where did the smiles go?
No matter, let’s get on with it.
I hand my application to the banker who looks at it then flips it over to the back where there is a bunch of fine print and he says,
“These are the terms and conditions.”
I nod my head and say,
“Ok.”
He flips the paperwork back to the front side and says,
“You have to sign here and here” he makes two “x” marks on the paper where I have to sign and slides it over to me with a pen.
I sign.
“Here is a Signature Card, print your name neatly on top, then sign your name in the Signature Box at the bottom of the card.”
I print my name, then sign again.
“I will need a copy of your Drivers License.”
I hand it to him and he rolls his chair to the corner of the cubicle where the copy machine is, he makes a copy and hands me back my license.
He then hands me a Deposit Slip and says,
“Fill this out, you need to deposit a minimum of $100 to open your account today.”
I fill out the slip, pull a bunch of crumpled $20’s out of my pocket and hand it to him.
The banker pulls out a folder from his desk with the bank logo on it, tears off the pink carbon copy of my application, as well as a carbon copy of my deposit slip, places it in the folder with some temporary blank checks and hands it to me.
He says,
“Your checks and your credit card will be in the mail, you should get them in the next two weeks.”
He then hands me the folder, stands slightly with his hand palm up, ushering me toward the exit.
I take the folder in both hands, then look at him like a lost sheep, nod my head and start walking for the door.
I hear the banker over my shoulder saying,
“Thank you for your business.”
I don’t turn around, I just keep walking toward the exit nodding my head up and down.
I get outside and I wonder to myself, what the hell just happened?
I signed a bunch of documents and nobody explained shit to me, I have a bank account and a credit card but I still don’t know anything about either.
I feel like I’m missing something.
I look down at the folder in my hand, I realize I have a bank account and a credit card.
I think to myself, "Well, how much trouble can this really be?"
-Takeaway: slow down, ask questions and don’t sign anything till you understand what your doing.
What you need to open a bank account
A bank account is the gateway to a credit card, and a credit card is the gateway to everything online. It's a good idea to know how they both work and it starts by knowing what you need to open a bank account. There is a good article on CreditDonkey.com written by Kevin L. called What You Need to Open a Bank Account with a nice infographic and brief description that's worth taking a look at.
The link below will take you there.
Until next time, God Bless and be well.
M. Joseph Benric is the author of Graduation Gift, A Step-By-Step Guide to Financial Literacy for Young Adults
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