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Often the hub of a person’s financial life, bank accounts can be quick and simple to open with the right materials in hand, including a valid government-issued photo ID, personal information such as your Social Security number (SSN), and perhaps an opening deposit.

Here, learn the details on what you need to open a bank account and how to navigate the process itself.

Checklist of What You Need to Open a Bank Account

Here’s a list of what you are likely to need when opening a savings or checking account. Gathering these materials before you actually begin the process of starting a new account can help you save time and frustration.

A Valid Government-Issued Photo ID

You’ll need to provide a valid government-issued photo ID such as a driver’s license, non-driver state ID card, or passport. Double-checking the expiration date is a smart move.

Your Social Security Number (SSN)

Be prepared to provide your SSN as a means of identification. You’ll also need to give contact information such as your address, phone number, and email. You might be required to submit proof of residency, such as a utility bill.

If you’re opening a joint account, you’ll need the identifying and personal information listed above for all the account owners. If you are doing this in person at a bank branch, you may or may not need the other person present. It’s a good idea to check in advance so you can avoid any inconvenience.

Proof of a Physical Address

You might be required to submit proof of your physical address. This can often be a document such as a utility bill.

Your Contact Information

You’ll also need to give contact information such as your address, phone number, and email.

Funds for an Opening Deposit

In many instances, you’ll need an initial deposit when opening a bank account. The minimum opening deposit varies from bank to bank but is often between $25 and $100, according to the Consumer Financial Protection Bureau. In some cases, it can be absolutely zero. You might need to establish direct deposits going forward. If you’re transferring the minimum deposit from another bank, you will likely need the routing and account numbers for that account.

How to Open a Bank Account in 5 Simple Steps

With these materials in hand, it can be quite simple to open a bank account. Here are the typical steps involved.

Step 1: Choose the Right Bank and Account for Your Needs

First, determine if you want to open a checking, savings, or combined checking and savings account. Or you might want to open a couple of different accounts at once.

Then, you can review various options in order to choose a bank. For instance:

•   You might decide to go with an online bank because of the convenience and the higher interest rates they may offer.

•   You might prefer a traditional bank, with a nearby branch, where you can regularly meet with the team in person.

•   You might like to bank at a credit union that you can become a member of based on, say, your profession.

Shop around a bit, and compare features (such as fee-free banking) to find the best fit.

Step 2: Gather the Documents From the Checklist Above

As noted above, whether you are applying online or in person, you will need to have a few documents needed to open an account on hand, including government-issued photo ID and your SSN.

Step 3: Complete the Application Online or in Person

Whether in person or online, you will want to make sure to fill this out carefully, double-checking the information to make sure it’s accurate.

Step 4: Fund Your New Account

You may or may not need to pay a deposit to get your account up and running. (If you are opening an account online and an opening deposit is required, you can typically do an electronic funds transfer.)

Many banks look for $25 to $100 as an opening deposit, but some — especially for checking accounts — may allow you to open an account without any cash.

Step 5: Set Up Online Access and Your Debit Card

Depending on the kind of bank account you are opening, you may need to wait to get a debit card, checks, and other materials. However, you should be able to use your account right away for at least some functions, such as setting up direct deposit and making electronic payments.

Opening an Account Online vs at a Bank Branch

The requirements for opening a bank account at an online vs. traditional bank are similar if not the same, generally requiring personal information and ID documents. Worth noting: You might open a bank account in person with cash. However, with an online bank account, you would probably need to make an electronic transfer or set up direct deposit.

Also keep in mind that while you can often open a bank account online in minutes, it may take a week or two for documents and your debit card to arrive and allow full access.

The Takeaway

Opening a bank account is usually quite simple. Typically, you’ll need personal information, government-issued photo ID, and an opening deposit to open a bank account. Once your bank account or accounts are established, you can enjoy a variety of conveniences and features that can help you manage your money better.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How much money do I need to open a bank account?

You will often need an initial deposit to open your checking account or your savings account. For checking and savings accounts, this can often be between $25 or $100, depending on the bank and the account services you’ve signed up for. In some cases, though, a bank may let you open a checking account with no money until your first paycheck or other amount of money is deposited.

What ID do I need to open a bank account?

You will typically need a government-issued photo ID to open a bank account. Usually, this means a driver’s license, a non-driver’s ID card, or a valid passport.

Do I need a good credit score to open a bank account?

You don’t need a good credit score to open a bank account. Here’s why: Banks typically don’t check your credit score when you apply for a checking or savings account. Instead, they may review your banking history via a ChexSystems report, which tracks past overdrafts, bounced checks, or unpaid fees. If you have a negative history with ChexSystems, you might be denied an account.

How long does it take to open an account online?

If you have all the necessary materials at hand (such as your SSN and government-issued ID), it may take just minutes to open a bank account online. However, it could take a week or two for the bank to fully process your application and send your debit card and other documents.

Can I open a bank account for my child?

You can typically open a bank account for your child, either as a joint account or a custodial account (like an UGMA account). You’ll usually need your ID and the child’s birth certificate and/or SSN as part of the application process.

Photo credit: iStock/spawns
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Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

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SOBNK-Q425-041

If you have student loans, you may sometimes see the total loan balance go up, due to such factors as the interest you owe, your repayment term, or loan fees.

Whether your student loans are in a period of deferment or you’ve working to make payments every month, it can be frustrating to see your balance increase instead of go down.

To discover why this happens and what to do about it, read on. You’ll learn what increases your total loan balance, ways to reduce it, and repayment options that may help.

Understanding Loan Balances

The way student loans work is that when you first take out a loan for your education, your loan balance is the amount you borrowed. However, that loan balance can increase or decrease depending on your payments, interest charges, and fees.

Principal vs. Interest Explained

A student loan typically consists of principal plus interest. The loan principal is the amount you originally borrowed. If you took out a $25,000 student loan to pay for school, your principal amount is $25,000.

Interest is the cost of borrowing money, and it is part of what you owe on your student loan balance. Federal Direct loans for undergraduates disbursed on or after July 1, 2025 and before July 1, 2026, have fixed interest rates of 6.39%, while Direct Unsubsidized Loans for graduate or professional students have a fixed rate of 7.94%. Direct PLUS loans for parents and graduates and professional students have a rate of 8.94%.

The rates on private student loans vary, but as of December 2025, they ranged from 3.18% to 15.99% or more, depending on such factors as your credit and the lender you choose. Private student loan rates may be fixed or variable. If your rates are variable, meaning they fluctuate with market conditions, it can be quite challenging to predict exactly how your loan balance will change over time.

When you sign into your student loan account, your loan balance is the total amount you currently owe on your loan.

Recommended: Student Loan APR vs. Interest Rate

Capitalization of Interest and How It Works

In some circumstances, unpaid interest on your loan capitalizes, or gets added onto, your principal balance. Then you end up paying interest on top of interest, which is what increases your total loan balance — and potentially your monthly payment as well.

Here’s how capitalization works: Interest accrues on your student loans even at times you’re not responsible for paying it, such as the six-month grace period after graduation or during student loan deferment. If you have unsubsidized Direct loans or Direct PLUS loans, the unpaid interest that accrued during these times is added to your loan principle. The principle is then higher and you pay interest on the new larger amount.

Factors that Contribute to Increased Loan Balances

Whether you’re in a period of deferment or active repayment, you probably don’t expect your student loan balance to be increasing over time. Unfortunately, there are various circumstances that can cause your federal student loan balance to increase, such as the ones below.

Accrued Interest

Most loans, with the exception of Direct Subsidized Loans, start accruing interest immediately from the date of disbursement. If you borrowed as a freshman in college and deferred payments the entire time you were in school and for the six-month grace period after graduation, your loan balance could significantly increase after four and a half years of nonpayment.

Loan Forbearance or Deferment

It’s possible to temporarily postpone payments through student loan deferment or forbearance if you go back to school, encounter financial hardship, or have another qualifying reason. Most loans accrue interest during this time, however, causing your loan balance to grow. The only exception is Direct Subsidized Loans, which don’t accrue interest during periods of deferment. In forbearance, all loan types accrue interest.

Missed or Late Payments

If you make late payments, or you miss payments on your student loans, the ramifications can be serious. For one thing, you’ll likely be charged late fees and penalties, increasing the amount you owe. Also, your federal loan will be considered delinquent after just one missed payment. And after approximately 90 days of missed payments, your loan servicer will report the delinquency to the credit bureaus, which can then negatively impact your credit score.

After 270 days of missed payments, your loan goes into default. At that point, the government can take a portion of your wages or seize your tax refund, and the debt you owe may be sent to a collection agency. A default stays on your credit report for seven years, which can severely damage your credit.

Negative Amortization

If your monthly payments are less than the interest you’re charged (meaning you’re not paying off your interest each month), this is known as negative amortization. The interest charges will then be added to the amount you owe, causing your loan amount to grow over time.

Negative amortization can happen under income-driven repayment (IDR) plans if your payments are not big enough to cover the accruing interest each month.

Strategies for Managing and Reducing Loan Balances

Now that you know what increases your total student loan balance, these are some strategies you can consider for reducing it.

Making Extra Payments Toward Principal

Putting extra payments toward your loan balance can help you pay it down faster and save money on interest. Here’s how: Making extra payments can help you reduce your principal, which can help you save on interest over time.

So, if you get a windfall, such as a birthday gift, or you earn a little extra cash, putting that money toward your student loans could help you pay down your debt faster. Just be sure to tell your lender to direct the extra payment toward your loan principal, which can help you shrink the balance.

Enrolling in Autopay for Interest Rate Discounts

When you set up automatic payments for your federal student loans from your bank account, you’ll save 0.25% on your interest rate. Many private lenders also offer a 0.25% rate discount for using autopay. Besides the savings, autopay helps ensure your payment will be consistent and on time.

Avoiding Missed Payments Through Budgeting

Making your monthly payments by the due date will help you avoid late fees and penalties. One way to do this is to create a budget that factors in your student loans.

To make a budget, calculate your monthly income, including paychecks from your regular job plus anything you earn from a side hustle, and then make a list of all your monthly expenses, including your student loans. If your expenses are greater than your income, see where you can cut back. Perhaps you can eliminate a streaming service or two, and bring lunch from home rather than buying it every day. Creating room in your budget and then sticking to that plan, can help you make your loan payments so you won’t fall behind and end up owing more.

Long-Term Financial Impact of Growing Loan Balances

A growing student loan balance is not only stressful, but it can also harm your overall financial health.

Effects on Total Repayment Amount

The total repayment amount of your loan can increase over time for reasons that include missed or late payments that result in late fees and penalties being added to what you owe, failing to keep up with accruing interest on your loan, and deferring your student loan payments, which can result in interest capitalization, significantly increasing the amount you owe. The more your debt grows, the harder it becomes to pay off.

Impact on Credit Score and Future Borrowing

A large student loan balance can also negatively impact your credit. The amount of debt you have makes up 30% of your FICO® credit score. Owing a sizable amount of debt can drag down your score, making it difficult to qualify for new loans or credit cards or get affordable rates. Plus, a high debt load increases your debt-to-income ratio (or DTI), and lenders prefer a DTI under 36%.

Tips for Preventing Loan Balance Increases

To keep your balance from increasing, make sure you understand how your student loans work — including the interest rate on the loans and when you need to start paying them back — and then review the different options for repaying them.

Choose the Right Repayment Plan

Before picking a repayment plan, make sure you understand how it will impact your loan balance and overall costs. A longer plan can reduce your monthly payments, but it tends to increase the amount of interest you pay over the loan’s term.

For example, if you have federal student loans, sticking with the Standard Repayment Plan will help you pay off your balance in 10 years, assuming you don’t use deferment or forbearance during that time. However, your monthly payments will be higher than they would be on other plans.

On the other hand, the Extended Repayment Plan lets you stretch out your repayment period for a longer term, which can lower your monthly balance but increase the amount you pay overall.

There are also income-driven repayment plans that typically lower the amount you owe each month (read more about how these plans work below).

Stay Informed About Loan Terms and Changes

Make sure you understand the terms and conditions of your loans. Look over your loan agreement to see what your interest rate is, how much you owe, and how long you have to repay your loans. If you have any questions, contact your loan servicer.

Also, check to see how your interest accrues. If your loan accrues interest right away, consider making interest-only payments while you’re in school to prevent your balance from rising.

Navigating Loan Repayment Options

Borrowers with federal student loans currently have repayment plans to choose from that could potentially reduce their student loan payments, such as income-driven repayment, as well as repayment alternatives like refinancing.

Income-Driven Repayment Plans

Income-Driven Repayment plans base your monthly federal loan payments on your discretionary income and family size and extend your loan term to 20 or 25 years. These plans can make your monthly payments more affordable. But you may pay more interest overall on an IDR plan.

There are currently three IDR plans — the Income-Based Repayment (IBR) Plan, the Pay As You Earn (PAYE) Plan, and the Income-Contingent Repayment (ICR) Plan. On the IBR plan, any remaining balance on your loans is forgiven when your repayment term ends.

However, as part of the Trump administration’s One Big Beautiful Bill, changes are coming to IDR plans. In July 2027, most of the current IDR plans, except IBR, will no longer accept new enrollees.

In July 2026, a new plan will be introduced, called the Repayment Assistance Plan (RAP), that bases payments on borrowers’ adjusted gross income (AGI). (This and a revised version of the Standard Repayment Plan will be the only repayment plans available to new loan borrowers as of July 1, 2026.)

Under RAP, depending on their income, a borrower would pay 1% to 10% of their AGI over a term that spans up to 30 years. If they still owe money after 30 years, the rest will be forgiven. The government will cover unpaid interest from month to month. However, a borrower on RAP could end up paying more interest over the life of the loan due to the longer repayment term.

Refinancing to a Lower Interest Rate

If you have good credit (or a creditworthy cosigner), another option you might consider is to refinance student loans for a lower interest rate and new repayment terms. With refinancing, you exchange your current student loans for a new loan from a private lender.

Some potential advantages of refinancing student loans may include lowering your monthly payment, saving money over the life of the loan, and/or paying off your balance faster. A student loan refinancing calculator can help you see how much you might save.

However, it’s important to keep in mind that refinancing federal loans means you forfeit access to federal benefits and protections, including federal student loan forgiveness programs. Also, if you refinance for an extended term, you may pay more interest over the life of the loan. For these reasons, refinancing student loans requires careful thought to decide if this is the right next step for you.

The Takeaway

Student loan debt can be stressful, and seeing your loan balance rise can add to this situation. Understanding what increases your student loan balance (such as your interest rate, loan fees, and repayment plan) can help you avoid paying more than you need to on your debt.

Everyone’s situation is unique, so consider your budget, financial goals, and any plans for loan forgiveness when choosing a repayment strategy. You may find that changing your federal loan repayment plan or refinancing your existing loans might help you better manage your student loan debt.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

What causes student loan balances to grow over time?

Some of the factors that can cause student loan balances to grow over time include interest that accrues; capitalization, which is when unpaid interest is added to your loan balance in certain situations, such as at the end of student loan deferment or when your six-month grace period after graduation ends; and fees and penalties due to late or missed student loan payments that are added to what you owe.

How does interest capitalization increase your loan balance?

Interest capitalization increases your loan balance because the interest that accrues during certain situations, such as student loan deferment, is added to your principal balance, making the balance bigger. You then owe interest on the new bigger balance, increasing the amount you’ll pay over time.

Can deferment or forbearance make your loan more expensive?

Yes, deferment and forbearance can make your loan more expensive over time. If you have unsubsidized federal loans or Direct PLUS loans, for example, the interest on your loans accrues while you’re in deferment, making your total loan balance bigger. (If you have subsidized federal loans, the interest does not accrue during deferment.) In forbearance, interest accrues on all types of federal loans, and the interest is typically added to the loan balance, meaning you’ll pay more over the life of the loan.

What are the best ways to lower your total loan balance?

Some ways to lower your student loan balance include making extra payments toward the principal on your student loans; paying the interest that accrues while you’re in school, during the six-month grace period after graduation, or during deferment; and setting up automatic payments for your loans to ensure that your payments are consistent and on time (as a bonus, you’ll typically get a $0.25% discount on your interest rate when you set up autopay).

Will refinancing help reduce my loan balance faster?

Refinancing might help you lower your student loan balance, but it depends on your specific situation. For example, if you qualify for a lower interest rate when you refinance, your monthly payments may be lower, which might help you to repay your loans faster. You might also be able to shorten your loan term through refinancing and pay off your loan more quickly.

Photo credit: iStock/:Olemedia

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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