Opening a savings account takes about 15 minutes and requires an ID, proof of address, and an initial deposit

A savings account is a bank account designed to hold money you want to keep separate from everyday spending. The bank pays you a small amount of interest — money the bank gives you just for letting them hold your cash. In return, the bank uses your money to lend to other customers.

To open one, you visit a bank branch or credit union in person, or you complete the process online if the bank offers it. You'll need a government-issued ID (driver's license, passport, or state ID card), proof that you live at your current address (a utility bill or lease usually works), and money to deposit — often as little as $25, though some banks require more.

The bank will ask for your Social Security number, which they use to check your banking history and prevent fraud. They'll also ask how you plan to use the account and whether you want online access. Within minutes, your account opens and you can start depositing money.

Key Takeaways

  • You need a valid ID, proof of address, and an opening deposit to open a savings account at a bank or credit union.
  • The bank pays you interest on the money you keep in the account, which means your balance grows without you adding more.
  • Online banks often pay higher interest rates than brick-and-mortar banks, but you cannot deposit cash in person.
  • Savings accounts have limits on how many times per month you can withdraw money, though these rules have loosened in recent years.
  • You can open a savings account even if you have had banking problems in the past, though some banks check your history.

What happens when you deposit money into a savings account

When you put money into your savings account, it stays there until you withdraw it. Unlike a checking account — which is designed for frequent deposits and withdrawals — a savings account encourages you to leave money alone by paying you interest for doing so.

The interest rate varies by bank and changes over time. Right now, some online banks pay rates that are much higher than traditional banks, but you should check the current rate before opening an account because rates shift frequently. The bank tells you the annual percentage yield, or APY, which is the amount you'll earn in a year if you don't touch the money.

For example, if you deposit $1,000 and the APY is 4%, you'll earn about $40 over the year (the actual amount is slightly different because interest compounds, meaning you earn interest on your interest). The bank deposits this interest directly into your account, usually monthly.

Where to open a savings account

You have three main choices: a traditional bank with physical branches, an online-only bank, or a credit union. Each has different strengths depending on what you need.

Traditional banks like Bank of America, Wells Fargo, or your local community bank let you walk in and deposit cash, speak to a person, and get help when ready. The tradeoff is that their interest rates are usually lower — sometimes less than 0.01% APY. If you need to deposit cash regularly or prefer face-to-face help, this might be your best choice.

Online banks like Marcus, Ally, or Discover have no physical branches, so you cannot deposit cash in person. Instead, you transfer money from another bank account or use mobile deposit (taking a photo of a check). The advantage is much higher interest rates — currently ranging from 4% to 5% APY depending on the bank. If you rarely need to deposit cash and want your money to grow faster, an online bank is worth considering.

Credit unions are member-owned financial institutions that often offer rates between traditional banks and online banks. You must be a member to open an account, which usually means living or working in a certain area, or belonging to a particular group. Credit unions often have lower fees and more personalized service than large banks.

Withdrawal limits and how they work

Federal rules once limited savings account withdrawals to six per month, but those rules changed in 2020. Most banks now allow unlimited withdrawals, though some still set their own limits — usually 6 or 10 per month. Check your bank's rules before opening an account if frequent withdrawals matter to you.

When you withdraw money, you can do it in several ways: at an ATM using your debit card, at a bank branch by speaking to a teller, or by transferring money electronically to another account. ATM withdrawals are usually when ready, while electronic transfers typically take one to three business days.

If you exceed your bank's withdrawal limit in a month, some banks charge a fee (usually $5 to $10 per extra withdrawal), while others straightforward close the account or convert it to a checking account. This is rare, but it's worth knowing your bank's policy.

Fees you might encounter

Many banks offer savings accounts with no monthly fee, but some charge $5 to $15 per month just to keep the account open. Others waive the fee if you maintain a minimum balance — often $500 or $1,000. Read the fee schedule before you open an account.

Beyond monthly fees, you might encounter charges for overdrafts (spending more than you have), excessive withdrawals, or requesting a paper statement. Online banks typically have fewer fees than traditional banks because they have lower operating costs.

Some banks also charge an inactivity fee if you don't use the account for a long time — usually six months to a year. This is uncommon, but it's another reason to read the terms before signing up.

How to choose between different savings accounts

Start by deciding what matters most to you: the interest rate, the ability to deposit cash in person, customer service, or low fees. If earning interest is your priority and you rarely deposit cash, an online bank will serve you better. If you need to deposit cash regularly or want to speak to someone in person, a traditional bank or credit union is the better choice.

Next, compare the interest rates and fees across three to five banks. Write down the APY, monthly fee, minimum opening deposit, and withdrawal limits for each. The difference in interest rates can add up over time — a savings account earning 4.5% APY will grow much faster than one earning 0.01%.

Finally, check whether the bank is insured by the Federal Deposit Insurance Corporation, or FDIC. This means if the bank fails, the government guarantees your money up to $250,000 per account. All legitimate banks are FDIC-insured, but it's worth confirming on their website.

What to do if you have had banking problems before

If you've had a checking account closed due to overdrafts, bounced checks, or fraud, you might worry that no bank will take you. The good news is that savings accounts are easier to open than checking accounts, and many banks don't check your history as thoroughly.

Some banks use a system called ChexSystems, which tracks banking problems like unpaid overdrafts or fraud. If you're in ChexSystems, you can still open a savings account — you just need to find a bank that doesn't use ChexSystems or that is willing to work with people in the system. Credit unions and smaller community banks are often more flexible than large national banks.

You can also request a copy of your ChexSystems report to see what's listed. If there's an error, you can dispute it. Visit www.chexsystems.com to request your report.

Frequently Asked Questions

Can I open a savings account online without visiting a bank?

Yes, online banks let you open an account entirely through their website or app. You'll upload photos of your ID and proof of address, and the process usually takes 10 to 15 minutes. However, traditional banks and credit unions typically require you to visit in person at least once.

What's the difference between a savings account and a money market account?

A money market account is similar to a savings account but usually requires a larger opening deposit and minimum balance. It often pays slightly higher interest in return. Both have withdrawal limits, though money market accounts sometimes come with a debit card or checkbook for easier access.

How much money should I keep in a savings account?

Financial advisors often suggest keeping three to six months of living expenses in savings for emergencies. Start with whatever amount feels manageable — even $50 per month adds up. The goal is to build a habit of saving, not to reach a specific number when ready.

Will opening a savings account hurt my credit score?

No. Opening a savings account does not affect your credit score because it's not a loan. Banks may check your credit when you open a checking account, but savings accounts rarely trigger a credit check.

Can I have multiple savings accounts at different banks?

Yes. Some people open accounts at multiple banks to take advantage of different interest rates or to organize money for different goals. Just remember that FDIC insurance covers up to $250,000 per bank, so if you have more than that, spread it across different institutions.