Opening a checking account online is easy, quick, and painless for most people, but there are several things to consider before you begin the process. For starters, do you want to open a regular checking account using the online platform of a traditional brick-and-mortar bank or credit union, or are you more interested in an electronic checking account at an online-only bank? The application process is similar, but the accounts differ, especially when it comes to features.
KEY TAKEAWAYS
- You can open an account online at a traditional bank/credit union or online-only entity.
- Accounts opened online are under the same regulation as accounts at regular banks and are FDIC insured.
- Account features vary by bank and by type of account. Research carefully.
- There is a process to dispute the denial of your application.
- Once approved, use your new checking account just like one at a traditional bank.
Regulation and FDIC Insurance
Regulation is one area where both types of checking accounts are alike. Oversight of traditional and online-only banks and credit unions rests with the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), Federal Reserve System (FRS), National Credit Union Administration, and state regulators in all 50 states. Traditional and online-only bank accounts are also FDIC insured though it’s up to you to verify the bank’s FDIC status.
Features by Bank and Account Type
Checking accounts at traditional and online-only banks are deposit accounts that let you withdraw funds for any purpose. Most also allow direct deposit, offer debit cards, feature online bill pay, electronic funds transfer (EFT), mobile banking, and overdraft protection.
The table below lists popular checking account features and the type of bank where that feature is most often found. When choosing the bank where you want to open your checking account, make sure it has the features you want and need
Once you know the features you want, search online for banks that offer them. Be aware of the limitations of one type of account compared to another. If you can’t live without paper checks, for example, your best option will likely be a traditional bank. If you want high-yield checking, your best bet is an online-only bank.
Gather Up Information
Once you’ve chosen a bank, go to the bank’s website and make a list of information and documentation you will need.
This will likely include:
- Full name
- Date of birth
- Citizenship status
- Current address
- Previous Address if you’ve been at your current address less than two years
- Phone number
- Email address
- Social Security number
- Government-issued ids, such as a driver’s license or passport
Finally, be prepared to provide information on how you plan to fund your accounts, such as routing and account numbers from your previous bank, credit or debit card, or a check issued from your last bank.
If you plan to open a joint account, you’ll need the same information and documentation for both account owners.
Complete the Application.
Fill out the online application using the information you have assembled. You may be required to scan or upload a photo of some items, such as your driver’s license.
When you are finished, click “submit.” You will probably receive an email or text message verifying receipt of your application and advising you about the next steps within a few minutes. One of those next steps may be the need for a signature card; a document banks retain and use to verify your signature on checks and other transactions. If so, the bank will likely mail you a card, which you (and the account co-owner, if applicable) sign and return. Most online banks don’t have this requirement and instead accept an electronic (digital) signature. If opening an account quickly is a priority, make sure the bank you choose doesn’t have this requirement.1
Verification Process
As part of the application process, the bank verifies your credit history and generates a consumer banking report. If you have a “thin” credit history due to not having much in your credit report, the bank may require additional information.
The consumer banking report will likely be conducted by one of two companies, ChexSystems or Early Warning System. These agencies investigate whether you have a history of bouncing checks, refusing to pay late fees, or have had accounts closed due to mismanagement on your part. According to the Fair Credit Reporting Act (FCRA), information about accounts closed for “cause” can remain on your consumer banking report for up to seven years.
How to Handle a Denied Application
If your application is denied due to the consumer banking report, the bank must tell you who generated the news and contact them. Use this information to obtain a copy of your message. Under the FCRA, you are entitled to a free copy of your report any time you are denied an account based on your consumer banking report.
If denied, here are three things you can do:
- Ask the bank to reconsider. Give your reasons and make your case. The bank is not bound by the report and may grant you an exception.
- File a formal dispute. If the information in the report is not accurate and the bank won’t reconsider, you have a right to file a dispute with the reporting agency.
- Look into a “second chance” account. This type of account, offered by some banks, typically has higher fees and more restrictions but provides a pathway to rebuild your checking account reputation.
Fund Your Account.
Assuming all goes well and you are approved, the next step is to put money in your new account. Most banks have a required minimum deposit that ranges from a dollar to a hundred dollars or more. There are various ways to do this, including writing a check, wiring money, using your debit card or transferring money electronically from another account. If you transfer money from a separate statement, you’ll need the account and routing numbers from that account. Cash is not an option when opening an account online. That requires a visit to a bank branch.
Debit Card/Checks Arrive
If the account you signed up for includes a debit/ATM card and checks, they will arrive in the mail after your application has been approved. The confirmation email should tell you how that will happen and how long it will take. For security reasons, the debit card, PIN, and checks will probably all arrive separately. When your card comes, sign it and activate it by phone or online. Your reviews should be used immediately.
Start Using Your Account
If your account is with a traditional bank, you will have the option to conduct most or all of your business online or at a local bank branch. If it’s with an online-only bank, unless you are granted access to an ATM network, everything you do will be done online.
Follow any instructions you receive about setting up the internet site of your new checking account. This may include downloading an app for your phone or tablet as well as bookmarking a website on your computer.
Move your direct deposits, EFTs, and automatic withdrawals to your new account. From there on, it’s a matter of getting used to the new system. Whether traditional or online, all banks and credit unions have a robust customer service system. Most let you contact them by phone, live online session, email, or text. If there are problems, make use of the system that works best for you.
How Often Should You Monitor Your Checking Account?
Keeping an eye on your banking activity can minimise certain risks
A checking account is a valuable tool for paying bills and covering expenses when using a debit card. Thanks to online and mobile banking, it’s easier than ever to track debit and credit transactions. But how often should you monitor your checking account?
According to a Lexington Law survey, 36% of Americans say they review their checking account daily, while 30% check it once weekly.1 There are several good reasons to keep a close eye on your banking activity, particularly if you’re concerned about preventing fraud or minimising fees. If you’re just getting started with your first checking account—or you’re wondering whether your current banking habits could use some improvement—these tips can help.
KEY TAKEAWAYS
- More than a third of Americans check their bank accounts daily, while nearly 20% check-in with their accounts less than once a month.
- Checking your bank account regularly can be a helpful way to spot potentially fraudulent activity.
- Keeping an eye on your checking account can also help you avoid costly banking fees.
Benefits of Monitoring Checking Account Activity
If you’re paying bills and spending regularly, then your checking account likely isn’t static. Money moves in and out, so looking at your account can be helpful in several ways. Here are some of the top reasons to stay in tune with your checking account.
Catching Fraudulent Activity
Bank account fraud can cost you big bucks, and it’s becoming an increasingly significant problem for banks and consumers alike. According to the American Bankers Association’s 2019 Deposit Account Fraud Survey Report, bank fraud totalled $25.1 billion in 2018. Check fraud accounted for $1.3 billion in losses, while debit card fraud losses totalled $1.2 billion.
Keeping an eye on your checking account regularly can help you spot potentially fraudulent activity and prevent financial losses before they happen. For example, an identity thief may obtain your debit card number and make a small test purchase hoping that you won’t notice. If the purchase goes through, the thief could then make larger purchases against your account.
That’s problematic because debit cards don’t have the same fraud protections as credit cards. According to the Federal Trade Commission, if you report your debit card lost or stolen before anyone uses it, you’re not responsible for any fraudulent purchases. However, different rules apply once a fraudulent purchase happens.
Watching for Excessive or Hidden fees
Banking fees can eat away at your balance, and monitoring your checking account can help you avoid triggering certain ones, such as overdraft fees and returned payment fees. A single overdraft fee can average around $30, according to the Federal Deposit Insurance Corporation (FDIC), so it pays to stay on top of your banking activity to make sure you’re not in danger of being hit with one.
If someone makes unauthorised transactions with your debit card number, but your card isn’t lost, you’re not liable for those transactions if you report them within 60 days of your statement being sent to you.
For example, say you deposit a check using a mobile check deposit. You assume the money will clear your account in one to two business days, so you pay your bills, buy groceries, and fill up on gas using your debit card. However, the check ends up taking five days to clear your account and, in the meantime, all those transactions post, putting your balance in the negative.
That could mean paying substantial overdraft fees if any of your payments are returned for insufficient funds. Checking in with your bank account to ensure the check had been posted would have been an easy way to avoid that.
Aside from overdraft fees, there are other banking fees to pay attention to, including:
- ATM fees (including surcharges from banks other than your own)
- Monthly maintenance fees
- Minimum balance fees
- Paper statement fees
- Balance inquiry fees
The average banking customer pays $475 in checking account fees every year.5 That’s not exactly a fortune, but it’s a decent amount of money that you could add to your emergency savings fund or use to pay down debt each year.
Monitoring your checking account can help you spot these and other fees your bank may be charging you. You can also track your balance, which can help you avoid putting your checking account into the red and racking up expensive overdraft fees.
Some banks can charge you multiple overdraft fees in one day, with or without a limit; in some cases, the bank can add an excess overdraft fee once you incur a certain number of overdrafts.
Better Managing Your Financial Life
A third reason to monitor your checking account is simply to improve your financial situation. Thirty-three per cent of Americans, for example, don’t follow a budget plan. And 74% of Americans live paycheck to paycheck, according to an American Payroll Association survey.
Either of those situations could spell trouble if you run into an unexpected expense and don’t have an emergency fund or at least a little extra cash in checking to cover it. Monitoring your checking account can help you better identify where you can cut back expenses, so you can start saving money.
How Often Should You Monitor Your Checking Account?
Not monitoring your checking account can be expensive in more ways than one. In terms of how often you should watch your checking account, the answer is entirely personal. Still, it’s safe to say that only checking in once a month probably isn’t enough if you want to minimise fraud and fees and stay on top of your finances.
If you’re not used to monitoring your checking account regularly, you could ease into it by logging into your account once or twice a week. From there, you could graduate once a day. For instance, you could scan your account activity in the morning or at the end of the day to see which debit and credit transactions have posted. It’s a simple way to keep up with your running available balance compared to writing everything down in a checking account register for account reconcilement.
What should you monitor for? When reviewing your checking account activity, first scan for any transactions you don’t recognise. Then, check to see if any deposits or payments you’ve scheduled have been posted, followed by your recent purchases. Finally, look through your accounts to see which fees, if any, your bank has charged.
At least once a month you should check your personal information, including your email and phone number, to make sure those things are up to date. Also, you may want to change your mobile and online banking password every three to four months. Choosing a new, unique password regularly could make it that much harder for identity thieves to access your account.
Tips for Monitoring Your Checking Account
There are several steps you can take to stay on top of your checking account and save time when managing your finances:
- Sign up for online and mobile banking access if you haven’t yet, so you can log in and check transactions on the go.
- Consider linking your checking account, savings account, and credit card accounts to a mobile budgeting app, so you can see all of your account activity at a glance.
- Set up banking alerts to notify you when a new credit or debit transaction posts, when a failed login attempt occurs, or when changes are made to your password or personal information.
- Pencil in a date on your calendar to review your online statement. You can also request paper statements, but you should check first to see if there’s a fee for that.
Remember, if you see a fee that you weren’t aware of—or an activity that suggests fraud—get in touch with your bank right away.