Opening a bank account is often one of the first steps toward managing money in the United States. It can give you a place to receive payments, pay bills, and set money aside for future needs.
But when you start comparing accounts, you may see unfamiliar terms: checking, savings, overdraft, direct deposit, and FDIC insurance. What do they mean, and which account should you choose?
The answer depends on how you plan to use your money. In this guide, we’ll explain the basics of U.S. bank accounts, the difference between checking and savings, and what to look for before opening an account.
What Is a Bank Account?
A bank account is an arrangement with a financial institution that lets you deposit and manage money. Depending on the account, you may be able to receive payments, make purchases, transfer money, pay bills, or earn interest.
Banks are not the only institutions that offer accounts. Credit unions also offer checking and savings accounts, although they may have membership requirements.
Before choosing an account, it helps to understand what you need it to do. An account designed for everyday transactions may have different features from one intended for savings.
What Is a Checking Account?
A checking account is generally designed for everyday money management. You can use it to receive income and make frequent payments.
Depending on the bank and account, a checking account may offer:
- A debit card for purchases
- ATM access
- Direct deposit
- Online or mobile banking
- Electronic transfers
- Bill payments
- Checks
For example, someone might receive their paycheck by direct deposit, pay rent from their checking account, and use the account’s debit card for groceries.
Features and fees vary, so do not assume every checking account works exactly the same way. Some accounts pay interest, but many people choose a checking account mainly for convenient access to their money.
What Is a Savings Account?
A savings account is generally used to set money aside rather than manage frequent everyday purchases. It can be useful for an emergency fund, a future expense, or another savings goal.
Many savings accounts pay interest. The amount you earn depends on the account’s rate, balance, and terms. Rates may change, so it is worth checking whether the advertised rate is variable and reviewing the current account agreement.
Savings accounts may have different withdrawal or transfer rules from checking accounts. Ask the bank about any transaction limits or fees before opening one.
For example, you might keep bill-paying money in checking and move a portion into savings each month. Keeping the two purposes separate can make it easier to track your goals.
Checking vs. Savings: What’s the Difference?
| Feature | Checking account | Savings account |
|---|---|---|
| Main purpose | Everyday transactions | Setting money aside |
| Debit card | Often available | Depends on the institution and account |
| Interest | Some accounts pay interest | Many accounts pay interest |
| Typical use | Paying bills, purchases, receiving income | Emergency funds and future goals |
| Fees and requirements | Vary by account | Vary by account |
You do not necessarily have to choose only one. Many people use both: a checking account for daily activity and a savings account for money they want to keep separate.
What Do You Need to Open a U.S. Bank Account?
The exact requirements depend on the bank or credit union. The institution must verify your identity, and it may ask for documents or information such as:
- Your name and date of birth
- An accepted form of identification
- An address
- An identification number
- A second form of identification or supporting document
- An initial deposit, if the account requires one
Accepted identification can vary. Some institutions accept certain foreign passports or consular identification, while others have different policies. A Social Security number or Individual Taxpayer Identification Number may be requested, but requirements depend on the institution and account.
Before applying, contact the bank and ask exactly which documents it accepts for your situation. The CFPB’s account-opening checklist provides a useful starting point.
How to Open a Bank Account Step by Step
Step 1: Decide What You Need
Think about how you will use the account. Do you need a debit card and bill payments, a place to save money, or both?
Also consider whether you prefer in-person branches, online banking, or a combination.
Step 2: Compare Accounts
Look beyond the account name or advertisement. Compare:
- Monthly maintenance fees
- Minimum balance requirements
- ATM access and fees
- Overdraft policies
- Initial deposit requirements
- Interest rate and account terms, if applicable
- Mobile and online banking features
An account with a high advertised interest rate may still have conditions or fees that matter to you.
Step 3: Confirm the Institution’s Insurance
Check whether the bank is FDIC-insured or whether the credit union is federally insured. Also confirm that the specific product you are opening is an insured deposit account.
Insurance rules are explained in more detail below.
Step 4: Gather Your Documents
Ask the institution what identification and supporting information it requires. If you are applying online, check how it verifies your identity and whether you need to upload documents.
Step 5: Read the Account Agreement
Before agreeing, review the fee schedule and account terms. Pay particular attention to how the institution handles low balances, overdrafts, and ATM withdrawals.
Step 6: Open and Fund the Account
Follow the institution’s instructions to apply online or in person. If an opening deposit is required, make sure you know the accepted payment methods and when the money will be available.
What Is Direct Deposit?
Direct deposit is an electronic payment sent directly into an account. Many employers use it to pay wages, and some government payments can also be deposited electronically.
To set it up, you may need to provide account information to the payer. Always confirm that you are sharing it through a legitimate and secure process.
Direct deposit can be convenient, but check the account terms: some banks waive a monthly fee only when specific direct-deposit conditions are met.
What Is an Overdraft?
An overdraft can occur when you do not have enough available money in your account to cover a transaction, but the institution pays it anyway. You generally have to repay the shortfall and may also be charged a fee.
For example, suppose you have $20 available and a $30 payment is processed. If the bank pays the transaction, the account may become overdrawn. Whether a fee applies depends on the account and transaction.
For everyday debit card purchases and ATM withdrawals, institutions generally cannot charge an overdraft fee unless you have opted into that coverage. Different rules can apply to other transaction types, such as checks or recurring payments.
You can reduce the risk of fees by monitoring your balance, setting alerts, and understanding your account’s overdraft settings. Read the CFPB’s overdraft guide before choosing an option.
What Is FDIC Deposit Insurance?
The Federal Deposit Insurance Corporation, or FDIC, protects eligible deposits at FDIC-insured banks if an insured bank fails.
The standard insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. Coverage depends on how accounts are owned and titled.
For example, eligible checking and savings deposits belonging to the same person in the same ownership category at the same insured bank are generally added together when applying the limit. Simply opening another account at that same bank does not automatically create another separate $250,000 of coverage.
FDIC insurance covers eligible deposit products—not every financial product a bank may offer. For example, it does not insure stocks or mutual funds against investment losses.
Federally insured credit unions have separate deposit insurance administered by the National Credit Union Administration, or NCUA. Check the relevant institution and coverage rules before depositing money.
Read the FDIC’s deposit insurance FAQ for official details.
Common Bank Account Fees to Watch For
Fees can make an account more expensive than it first appears. Before opening an account, ask about the following:
Monthly Maintenance Fees
Some accounts charge a monthly fee. The bank may waive it if you meet certain conditions, such as maintaining a required balance or receiving a qualifying direct deposit.
ATM Fees
You may pay a fee for using an ATM outside your bank’s network. The ATM operator may also charge its own fee.
Overdraft and Related Fees
If a transaction exceeds your available balance, the bank’s overdraft policy may determine whether the payment is declined, paid, or subject to a fee.
Transfer or Other Service Fees
Some accounts charge for particular services, such as certain transfers or paper statements. Review the fee schedule rather than assuming a service is free.
How Can You Keep Your Bank Account Secure?
Good security habits can help protect your account and personal information.
- Use a strong, unique password for online banking.
- Turn on additional account security features when available.
- Review transactions regularly.
- Be cautious of unexpected calls, texts, or emails asking for account details.
- Contact your bank using its official app, website, or published phone number.
- Report unfamiliar transactions promptly.
A message that looks like it came from your bank is not always genuine. If something feels suspicious, avoid clicking the link and contact the institution directly.
Does a Bank Account Build Your Credit Score?
A regular checking or savings account does not generally build credit simply because you keep money in it. These are deposit accounts, not the same as borrowing through a credit card or loan.
Some products offered alongside a bank account may have different reporting arrangements, so check their terms. Do not open a product solely because someone promises it will increase your credit score.
To understand credit history and scores, read our article: U.S. Credit Scores Explained: A Beginner’s Guide.
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Frequently Asked Questions
Is a checking account better than a savings account?
Neither is automatically better. Checking is generally designed for frequent transactions, while savings is generally intended for setting money aside. Many people use both.
Do all U.S. bank accounts charge monthly fees?
No. Fees vary by institution and account. Some accounts have no monthly fee, while others waive it only if you meet certain requirements.
Can I open a bank account without a Social Security number?
Some institutions may accept other identification or an ITIN, depending on their policies and the account. Contact the bank or credit union to ask what it accepts for your circumstances.
Are all bank products insured by the FDIC?
No. FDIC insurance covers eligible deposits at FDIC-insured banks, subject to its rules and limits. It does not cover investment products such as stocks or mutual funds against losses.
Does opening a savings account automatically build credit?
Generally, no. A savings account is a deposit account and does not ordinarily build a credit history simply because you hold it.
Final Thoughts
A good bank account should fit the way you manage money—not the other way around. Checking accounts can make everyday transactions easier, while savings accounts can help you keep money separate for future goals.
Before opening an account, compare fees, identification requirements, access options, and deposit insurance. A few questions at the beginning can help you avoid unexpected costs later.
This article is for general educational purposes and is not financial, tax, or legal advice. Account terms and requirements vary. Check the institution’s current disclosures or consult a qualified professional about your circumstances.