Banks, credit unions, and online-only institutions are your three main routes, and each one works differently
You can open a bank account at a traditional bank branch, a credit union, or an online bank. Each route has real differences in how you open the account, what it costs, and what you can do with it once it's open. A traditional bank gives you a physical location to visit and a teller to talk to. A credit union is a member-owned cooperative where you have a say in how it runs. An online bank has no branches but typically charges no monthly fees and pays higher interest on savings. The right choice depends on whether you need in-person service, what fees matter to you, and how you plan to use the account.
Key Takeaways
- Traditional banks have physical branches where you can deposit cash and speak to someone in person, but often charge monthly maintenance fees unless you meet balance or deposit requirements.
- Credit unions are member-owned and typically offer lower fees and better rates on savings, but you must meet membership requirements and may have fewer ATMs available.
- Online banks charge no monthly fees and pay higher interest on savings accounts, but you cannot deposit cash in person and customer service is phone or chat only.
- You will need a government-issued ID, proof of address, and usually a Social Security number or ITIN to open an account at any institution.
- Some banks and credit unions offer second-chance accounts if you have banking history problems, though these accounts may have higher fees or lower limits.
Traditional banks: branches, tellers, and monthly fees
A traditional bank is a for-profit institution with physical branches in your area. You walk in, speak to a teller, and can deposit cash, withdraw money, or ask questions about your account. Most traditional banks charge a monthly maintenance fee—typically $10 to $15—unless you meet conditions like keeping a minimum balance, setting up direct deposit, or maintaining a certain number of debit card transactions per month.
To open an account, you go to a branch with your ID and proof of address. The process takes 15 to 30 minutes. You choose a checking account, savings account, or both. The bank runs a check through ChexSystems, a database that tracks banking history, to see if you have unpaid overdrafts or fraud flags at other banks. If you pass, the account opens when ready and you can start using it the same day.
The trade-off is clear: you pay for convenience. If you need to deposit cash regularly, speak to someone about problems, or prefer a familiar name, a traditional bank works. If you rarely visit a branch and want to avoid fees, you will pay for a service you do not use.
Credit unions: member-owned and usually cheaper
A credit union is owned by its members—the people who hold accounts there. It is a nonprofit, so profits go back to members as lower fees, better interest rates, and more flexible lending. Credit unions typically charge no monthly maintenance fee or charge $3 to $5 instead of $10 to $15. They also often pay higher interest on savings accounts and charge lower overdraft fees.
The catch is membership. You cannot straightforward walk into a credit union and open an account. You must meet the membership requirement, which varies by institution. Some credit unions serve people who work for a specific employer. Others serve people who live in a certain county or belong to a certain organization—a church, a union, a professional group. A few have no restriction and accept anyone. Before you visit, check the credit union's website to confirm you meet the membership rule.
Once you confirm membership, the process is similar to a bank: bring ID and proof of address, fill out an process, and the credit union runs a ChexSystems check. Most credit unions open accounts on the spot. The downside is fewer ATMs—credit unions have smaller networks than banks, though many participate in shared branching networks that let you use other credit unions' ATMs and tellers.
Online banks: no fees, higher interest, no cash deposits
An online bank exists only on the internet. You open an account on their website or app, fund it by transferring money from another bank account, and manage everything digitally. There are no branches, no tellers, and no way to deposit cash in person. Customer service is by phone, email, or chat.
The benefit is cost. Online banks charge no monthly maintenance fee because they have no branches to staff or rent. They pay higher interest on savings accounts—sometimes 4% to 5% annually on a high-yield savings account, compared to 0.01% at many traditional banks. They also charge no overdraft fees on most accounts, or charge a flat fee instead of a per-transaction charge.
To open an account, you visit the bank's website, enter your personal information, and upload a photo of your ID. The bank verifies your identity electronically and runs a ChexSystems check. The account opens in minutes to a few hours. You then transfer money from an existing bank account to fund it. If you need to deposit cash, you can use a mobile check deposit feature (photograph the check with your phone) or transfer cash from another bank account, but you cannot hand cash to a teller.
Second-chance accounts if you have banking problems
If you have been denied a bank account because of ChexSystems issues—unpaid overdrafts, fraud flags, or closed accounts with negative balances—some banks and credit unions offer second-chance accounts. These accounts are designed for people rebuilding their banking history. They usually have higher monthly fees ($15 to $25), lower ATM limits, and restrictions on the number of transactions per month.
Second-chance accounts are offered by some traditional banks and credit unions, not typically by online banks. You will need to contact institutions directly and ask whether they offer them, because they are not always advertised on the website. The account works like a regular account once it is open, but the restrictions remain in place for a set period—usually six months to a year. After that, you can often move to a regular account with lower fees.
What you need to bring to open an account
Every bank and credit union requires the same basic documents. Bring a government-issued photo ID—a driver's license, passport, or state ID card. Bring proof of your current address, which can be a utility bill, lease, mortgage statement, or government mail dated within the last 60 days. You will also need your Social Security number or an ITIN (Individual Taxpayer Identification Number) if you do not have a Social Security number.
Some institutions ask for additional information: your employment status, your income, or your mother's maiden name for security purposes. Online banks verify your identity electronically using the information you provide, so they may ask follow-up questions to confirm you are who you say you are. If you cannot provide a Social Security number or ITIN, ask whether the institution offers accounts for people without one—some do, though they may have higher fees or lower limits.
Comparing the three routes side by side
| Feature | Traditional Bank | Credit Union | Online Bank |
|---|---|---|---|
| Monthly fee | $10–$15 (waivable) | $0–$5 | $0 |
| In-person service | Yes, branches | Yes, branches | No |
| Cash deposits | Yes, at teller | Yes, at teller | No |
| Interest on savings | 0.01%–0.5% | 0.5%–2% | 4%–5% |
| ATM access | Large network | Smaller network | Partnered ATMs |
| Opening time | 15–30 minutes | 15–30 minutes | Minutes to hours |
| Membership requirement | No | Yes (varies) | No |
Frequently Asked Questions
Can I open an account online at a traditional bank?
Some traditional banks let you start the process online, but you usually have to visit a branch or mail in documents to complete it. A few large banks like Chase and Bank of America offer full online opening for checking and savings accounts in most states, but you still cannot deposit cash without visiting a branch later. Check your bank's website to see what it offers.
What happens if I have a ChexSystems problem?
ChexSystems is a database that tracks unpaid overdrafts, fraud, and closed accounts with negative balances. If you have a problem, the bank will likely deny your account. You can request a copy of your ChexSystems report for free once per year at www.chexsystems.com. If there is an error, you can dispute it. Some banks and credit unions offer second-chance accounts despite ChexSystems issues.
Do I need a minimum balance to open an account?
Most banks and credit unions do not require a minimum balance to open an account, but some do require one to waive the monthly fee—typically $500 to $1,500. Online banks almost never require a minimum balance. Check the specific institution's requirements before you open.
Can I open an account without a Social Security number?
Some banks and credit unions accept an ITIN (Individual Taxpayer Identification Number) instead of a Social Security number. Others require a Social Security number and will not open an account without one. Call ahead to ask. Online banks are less likely to accept ITINs than traditional banks or credit unions.
Which type of account should I choose if I need to deposit cash regularly?
A traditional bank or credit union is your only option if you need to deposit cash in person. Online banks have no way to accept cash deposits. If you choose an online bank, you would need to deposit checks by photograph or transfer cash from another account, which takes longer.