A bank account is how money moves in and out of your life

A bank account is a record the bank keeps of your money. When you deposit cash or receive a direct payment, the bank adds it to your account. When you write a check or use a debit card, the bank subtracts it. The bank holds your money, keeps it separate from other customers' money, and protects it with federal insurance. Without an account, you have no way to receive paychecks electronically, pay bills online, or prove you have savings.

Most employers now require a bank account to pay you. Government benefits—Social Security, unemployment, tax refunds—go to a bank account by default. Landlords and utility companies want to draft payments from an account rather than chase you for checks. If you don't have one, you end up paying fees to cash checks at check-cashing services, paying more to buy money orders to pay bills, and carrying large amounts of cash, which is risky.

Key Takeaways

  • A bank account is required by most employers to receive paychecks and by most government programs to receive benefits.
  • Without an account, you pay fees to cash checks and buy money orders, which adds up to hundreds of dollars per year.
  • Banks require proof of identity and proof of address, both of which you can obtain even if you are unhoused or have a thin credit history.
  • If you have been denied a bank account, you may be in ChexSystems, a database banks use to screen customers—you can request your report and dispute errors.
  • Second-chance banking accounts and credit unions often accept customers banks have turned down.

What you need to open an account

Banks require two things: proof of identity and proof of address. A valid government-issued ID—driver's license, passport, state ID card—counts as proof of identity. For proof of address, bring a recent utility bill, lease, mortgage statement, or bank statement in your name. If you don't have a utility bill, a lease signed by you works. If you are unhoused, some banks accept a letter from a shelter or social services agency on letterhead stating your name and that you receive services there.

You do not need a credit history, a Social Security number (though most banks ask for one), or a minimum deposit to open most accounts. Some banks waive the minimum deposit entirely. Others require $25 to $100. Bring your ID and address proof to the bank, fill out a form, and the account opens the same day. You receive a debit card within one to two weeks.

If a bank turns you down, ask why. The answer matters: it tells you whether the problem is fixable or whether you need a different type of account.

Why a bank might say no

ChexSystems is a database that banks use to screen customers. If you have overdrawn accounts, written bad checks, or had an account closed for fraud or abuse, the bank that closed it reports you to ChexSystems. When you try to open a new account, the new bank checks ChexSystems and may deny you based on what they find there. This is the most common reason for rejection.

You have the right to see your ChexSystems report. Go to chexsystems.com and request your report. If information is wrong—a closed account you don't remember, a date that is incorrect, a fraud claim you disputed—you can file a dispute with ChexSystems. They investigate and correct errors. If the information is accurate but old (more than five years), it may still appear but banks are less likely to reject you based on it.

Other reasons for rejection include a name mismatch (your ID says one name but you are known by another), an address that does not match your ID, or a Social Security number that does not match government records. These are fixable: bring additional documents showing your current legal name or address, or contact the Social Security Administration to correct their records.

Second-chance accounts and credit unions

If mainstream banks reject you, second-chance banking accounts are designed for people with ChexSystems records or thin banking history. Banks like Chime, LendingClub, and GoBank market these accounts directly. They charge monthly fees ($5 to $15) but do not check ChexSystems or require a minimum deposit. They offer debit cards and online banking. The tradeoff is that you pay for features a traditional bank account gives you free.

Credit unions are nonprofit banks owned by their members. They often have looser approval standards than commercial banks and may overlook ChexSystems records if you can explain what happened. To join a credit union, you must meet their membership requirement—this varies by credit union and might be living in a certain county, working for a certain employer, or belonging to a certain organization. Once you join, you can open an account. Find credit unions near you at co-opsharedbranch.org.

A second-chance account or credit union account is a real bank account. It works the same way as any other account. The goal is to rebuild your banking history so that after one to two years of no overdrafts and no problems, you can move to a traditional bank account with lower fees.

What happens after you open an account

Once your account is open, you can set up direct deposit with your employer. Give your employer your account number and routing number (both appear on the bottom left of a check, or you can ask the bank). Your paycheck will arrive in your account on payday, usually one business day before it would have if you received a paper check.

You can pay bills online through your bank's website or app. You can set up automatic payments so bills are paid on the same day each month without you having to do anything. You can transfer money to other people's accounts for free. You can withdraw cash at ATMs. You receive a statement each month showing every deposit and withdrawal, which is proof of income and proof of payment if you ever need it.

Keep your account in good standing: do not overdraw it, do not write checks you cannot cover, and do not let it sit unused for years (banks may close inactive accounts). If you make a mistake and overdraw, call the bank when ready and ask if they will reverse the overdraft fee. Many banks will do this once if you have been a customer in good standing.

How federal insurance protects your money

The Federal Deposit Insurance Corporation (FDIC) insures bank deposits up to $250,000 per account holder per bank. This means if the bank fails, the government pays you back. You do not have to do anything to get this insurance—it is automatic. If you have $5,000 in the account and the bank closes, you get your $5,000 back.

The $250,000 limit applies per bank, not per account. If you have a checking account and a savings account at the same bank, they share the $250,000 limit. If you have accounts at two different banks, each bank's account is insured separately up to $250,000. Most people never need to worry about this because their balance is well below $250,000.

Frequently Asked Questions

Can I open a bank account without a Social Security number?

Most banks require a Social Security number, but some do not. Credit unions and some community banks may open accounts for people with an Individual Taxpayer Identification Number (ITIN) instead. Call ahead and ask before you go in. You will still need proof of identity and proof of address.

What if I have an outstanding debt or judgment against me?

A debt or judgment does not prevent you from opening a bank account. Banks do not check for debts when you open an account. However, if a creditor has a judgment against you, they may be able to freeze your account or garnish it. This is separate from opening the account—it happens later if you are sued and lose.

Can I open an account if I am unhoused?

Yes. Bring a government-issued ID and a letter from a shelter, social services agency, or outreach program on their letterhead stating your name and that you receive services there. Some banks accept this as proof of address. If one bank says no, try a credit union or second-chance bank.

How long does it take to open an account?

The account opens the same day you visit the bank. You can use it when ready online or at ATMs. Your debit card arrives by mail within one to two weeks. Some banks offer temporary digital cards you can use before the physical card arrives.

What if I want to close my account later?

Call the bank or visit in person and ask to close the account. They will ask why (this is optional to answer). Any remaining balance will be sent to you by check or transferred to another account. There is no penalty for closing an account, though some banks charge a fee if you close it within a certain period (usually 90 days to six months). Ask about this before you open.