What to know before choosing your first bank account

Quick insights

• Many people use bank accounts as a convenient way to store their money.
• Two of the most common types of bank accounts are checking and savings accounts.
• Receiving a first paycheck, going off to college or living on your own for the first time are common reasons why people open their first checking account.

If you’re considering opening your first bank account, researching different options can help you find the one that meets your needs.

Read on for some things you may want to know if you’re thinking about opening your first bank account.

Reasons to use a bank

Opening a bank account is one of the early steps many people take on their financial journey. Many banks offer different types of accounts and products to hold your money and earn interest. Two of the most common bank accounts people open first are the following:

• Checking account: An account that allows for frequent transactions including deposits, withdrawals and transfers. It typically comes with a debit card, check-writing capabilities and online banking features.
• Savings account: An account for storing money while earning interest on the balance. Unlike checking accounts, savings accounts generally offer higher interest rates but may have limitations on the number of transactions you can make each month.

When to open your first checking account

There is no singular rule for determining when you should open your first checking account. Your age, life events or income may help you determine the best time for you. You may want to open a checking account when you:

• Start your first job: Having a checking account allows you to set up direct deposit for your paycheck. Direct deposit is often more convenient and faster than receiving physical checks.
• Go to college: College students may need a checking account to manage day-today expenses. It can be useful for handling transactions like paying for books, meals and housing.
• Become financially independent: When you move out of your parents' home, you'll likely have new responsibilities like paying rent, utilities and other bills. A checking account provides a way to automate these payments through online banking.
• Starting a business: If you're embarking on launching a small business, a separate business checking account can help you manage your business finances, track expenses and receive payments. 

Many banks require account holders to be at least 18 years old. However, some banks may allow minors to open an account with the help of a parent or guardian.

How to choose your first bank

One of the first decisions you may make is choosing the type of bank that best aligns to your needs. There are three common types of banks:

• Traditional banks: Typically refers to the physical location of your local bank branch.
• Online banks: Online banks allow for many banking activities to be performed through a website. Many traditional banks offer online banking services, but there are some newer banks that exist entirely online and have no physical locations at all.
• Credit Unions: A member-owned financial cooperative that provides a range of financial services, similar to those offered by banks.

Each type has pros and cons, depending on your banking needs. For example, if the ability to visit a branch in-person is important, an online bank may not be for you. When weighing traditional vs online banking or a credit union, consider the services each offers and how they can best support your financial needs.

Factors to consider when opening my first bank account

There are many factors you may want to think about before choosing a bank and opening an account. A few notable ones include:

Financial products

Bank can offer many types of accounts, including checking, money market, retirement and business accounts. It may be helpful to know the full suite of products offered and how they can help you not only today, but potentially in the future as your financial needs change.

Fees

Understanding the common fees associated with checking accounts can help you choose the right bank and reduce costs. Common bank fees include:

• Monthly maintenance fees: Banks can charge a monthly fee for maintaining your account. This can range from $5 to $15 or more, depending on the bank and the type of account.
• Overdraft fees: If you make a transaction that exceeds your account balance, the bank may cover the difference and charge an overdraft fee.
• Non-sufficient funds (NSF) fees: Similar to overdraft fees, NSF fees are charged when a transaction is declined due to insufficient funds in your account.
• ATM fees: Using an ATM that is not affiliated with your bank can lead to charges from both the ATM operator and your bank.
• Account closure fees: Some banks charge a fee if you close your account within a certain period after opening it, often within 90 to 180 days.
• Wire transfer fees: Sending money via wire transfer can incur fees.
• Paper statement fees: As banks encourage digital banking, they may charge for issuing paper statements.
• Minimum balance fees: Some accounts have minimum balance requirements, and failing to maintain this balance can result in a fee.

Interest rates

Depending on where you bank and the type of account, your money may earn interest. Interest is money you earn for keeping your money at the bank. Each bank will have its own rates, and rates vary depending on the type of account.

Alerts

Accounts may offer the ability to set up alerts for various activities, including:

• Deposits
• Low account balance
• Withdrawals
• Bill pay reminders
• Profile changes
• Unusual activity

How and when you set up these alerts may be fully customizable depending on the bank. Many banks offer the option of text alerts, email alerts or both.

Security

Account security may be a factor in your decision-making process. You may want to understand the security features of your bank, including FDIC insurance, fraud protection measures and online banking.

Customer service

If you have never had a bank account before, customer service could be important. Access to live customer support may impact your choice of bank.

Convenience

If you want the ability to bank in person, the location of the nearest branch could be an important factor in your decision. You may want to review the availability of physical ATMs as well.

For those who prefer online banking, mobile features and app usability may be significant factors.

In summary

As you weigh the pros and cons of your banking options, consider what features of a bank best fit your financial goals and lifestyle. But your research doesn't have to strictly be done online.

Many banks offer consultations to help customers explore their banking options. You may find it helpful to schedule a consultation with a bank representative.