Set up your banking
Financial goals / Manage spending and save
Edited by: Amy Kalin, Senior Editor, Credit & Debt
This date may not reflect recent changes in individual terms.
Learn which bank accounts to open, what to look for in a bank, and how to use banking tools to make managing money easier.
Image: Set-up-your-bankingEditorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.
Start with two accounts
One of the best (and most basic) benefits of banking is that it helps you separate your spending money from savings.
Most people do this by opening a checking account and a savings account:
Checking
- For deposits and everyday spending
- Comes with a debit card
- Makes it easy to pay bills
Savings
- Allocate part of your direct deposit to savings
- Set up auto-transfers from checking to savings
- Potential to earn interest on your funds
FYI: When you open a checking account, many banks offer to link a savings account to it, making it easy to transfer funds and automate savings.
Types of banks
You have a lot of options for banking. Here’s how they break down:
Traditional banks
For-profit companies with physical branches (and online services).
Credit unions
Nonprofit banks that serve specific groups of people within a community. Usually fewer physical branches.
Online banks
Much like traditional banks, but with few or no branches.
Neobanks
Financial tech companies (like Credit Karma) that partner with traditional banks to offer online-only accounts and other banking services.
Reality check
Image: true falseA: False. Credit unions serve various communities like teachers, military families, or people in a certain region. You have to qualify for membership based on who they serve. There are thousands of federally insured credit unions across the U.S.
What to look for in a bank
Image: Group 2147230770No-cost services
Your bank should save you money, not take it from you. Look for…
- No monthly maintenance fees
- No minimum balance requirement
- Free transfers between checking and savings
- Free alerts that flag a low balance, large purchases, or bills due
Image: Group 2147230770Banking tools
Your bank should make handling your money easy and automatic. Look for…
- Direct deposit
- Automated savings transfers
- Overdraft protection
- Early paycheck deposits
- Paycheck advance option
Reality check
Image: true falseA: False. The typical overdraft fee is around $35 per overdraft (not per month), and Americans lose billions every year to these fees, according to data from the Consumer Financial Protection Bureau. A rare mistake is OK, but if overdrafts happen a lot, those charges add up fast. Consider setting up low-balance alerts and no-fee overdraft protection, if your bank offers it, can help.
Make the most of banking tools
Banking tools can help with anything from automating deposits and transfers to backing you up if you’re short on cash.
Here’s your rundown of common banking tools.
Direct deposit
Most banks allow you to have your paycheck or government benefits automatically deposited electronically.
Image: Pros
- Get paid faster — no paper check to deposit.
- Split your auto deposit — put some in savings.
Image: Watch-outs
- Be sure to provide your employer with accurate bank info – errors cause delays.
Image: Quick tip
- Banks sometimes require direct deposit to unlock other banking tools.
Automated savings
A lot of banks offer ways to schedule transfers from checking to savings at any frequency and amount.
Image: Pros
- Build savings without thinking about it.
- Makes progress feel automatic.
Image: Watch-outs
- If your budget is tight and an unexpected expense hits your checking account, you might need to take action and pause a transfer.
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- Start small and adjust. Even $5 to $20 per paycheck adds up.
Overdraft protection
The bank covers your transactions (up to a certain amount) when you don’t have enough money in your checking account.
Image: Pros
- Prevents declined payments, so it can protect bills from going unpaid if you’re short on funds.
Image: Watch-outs
- Many overdraft programs come with fees.
- “Protection” can make it easier to overspend.
- Overdrafts = spending more than you have, which can lead to a cycle of debt.
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- Look for accounts with no fees.
- Opt in or out — it’s your choice.
- Set low-balance alerts to help avoid overdrafts.
Early paycheck deposit
Some accounts let you access your usual direct deposit a few days before payday.
Image: Pros
- This can help with bad-timing scenarios (if your rent is due a little before you’re paid, for example).
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- Your budget needs to stretch a few days longer until the next month.
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- Don’t treat the early timing as a reason to spend more.
- Keep your original bill-paying schedule so you don’t run out of cash before the next month.
Paycheck advance
A feature offered by some banks or apps that allows you to tap into a portion of your usual pay ahead of payday.
Image: Pros
- Provides a safety net for emergency expenses (like a sudden car repair) without the high interest rates of a typical payday loan.
Image: Watch-outs
- It’s still a loan — not extra money. Your next paycheck will be smaller by the amount you advanced.
Image: Quick tip
- Use this only on a truly as-needed basis to avoid creating a gap in your budget for the following month.
Next steps: Budget and save
Choose where to make more progress:
Got questions? We have answers.
Overdraft protection is an optional banking service that covers a purchase or payment if you’re short on funds, instead of rejecting the transaction. Some banks may cover the transaction as a temporary courtesy or by drawing from a linked savings account or credit line, typically for a fee (check your bank’s terms). Credit Karma Money™ Spend overdraft protection is free with a qualifying direct deposit of $200 or more (coverage starts at $20 and can go up to $200 for eligible members).
Overdraft protection can be a helpful tool that allows a bill or important purchase to go through when you don’t have enough funds in your account. But using it regularly can trap you in a cycle of overdrafts and cost a lot in fees. If your bank offers no-fee overdraft protection, it may be worth having for rare occasions.
Payday advance, sometimes called a paycheck advance, refers to a banking service that lets you access part of your regular, direct-deposited paycheck ahead of time, often at low cost (or even for free with no mandatory fees, as with Paycheck Advance from Credit Karma). A payday loan is a high-cost short-term loan that typically charges up to $30 for every $100 borrowed).
Banks and credit unions offer similar basic services, but a bank may be better for someone who prefers a bigger institution and greater access. Credit unions (smaller, nonprofit banks) may offer more personalized service and better savings and loan rates, but access is more limited because they serve specific communities and groups — you have to apply for membership.
To open a bank account, start by figuring out the bank and type of account you want, like checking or savings. Then apply online or at a branch. You’ll need to verify your identity (be ready with a government-issued photo ID and details like your Social Security number, address, and birthdate) and make a first deposit into the account.