You don't need a savings account, but you do need somewhere safe to keep money
A savings account is not required by law. You can live without one, receive paychecks without one, and pay bills without one. But if you're waiting for money to arrive—a tax refund, an insurance payout, a government payment—you will need a way to receive it. A savings account is the most straightforward way, but it's not the only way.
The real question is not whether you need a savings account. It's whether you need a bank account at all, and if so, which type. That depends on what you're waiting for, how you want to receive it, and what you plan to do with the money once it arrives.
Key Takeaways
- Most government refunds and payments require either a bank account or a routing number to deposit directly, so you will need one or the other to receive money by direct deposit.
- A checking account works just as well as a savings account for receiving refunds and payments; the difference is in how you use it afterward, not how money arrives.
- If you don't have a bank account, you can receive some refunds by check or prepaid card, but this takes longer and costs more than direct deposit.
- Some people use a savings account only to receive money and then move it elsewhere, which is a valid strategy if you prefer not to keep money in a bank.
- Banks and credit unions have different requirements; some offer accounts with no minimum balance or monthly fee, while others do not.
When you need a bank account to receive money
If you're waiting for a tax refund, stimulus payment, unemployment benefits, or insurance payout, the fastest and cheapest way to receive it is direct deposit. Direct deposit puts money straight into a bank account using your routing number and account number. Most government agencies and insurance companies offer this option and often push you toward it because it costs them less than mailing a check.
To set up direct deposit, you need a bank account—either checking or savings. The agency or company will ask for your routing number (which identifies your bank) and your account number (which identifies your account). You provide these numbers on a form, online portal, or over the phone. Once set up, deposits arrive in one to three business days after the agency processes your refund or payment.
If you don't have a bank account, you can still receive money, but your options narrow. The IRS, for example, will mail you a check if you don't provide direct deposit information. Some insurance companies and state agencies offer prepaid debit cards as an alternative. Both of these methods take longer—checks take five to ten business days, and prepaid cards can take two to three weeks—and both cost more in the long run if you need to cash them or pay fees.
Checking versus savings: which one matters for receiving refunds
For the purpose of receiving a refund or payment, it makes no difference whether you use a checking account or a savings account. Both have routing numbers and account numbers. Both can receive direct deposits. The IRS, your state tax authority, and insurance companies don't care which type you choose.
The difference shows up after the money arrives. A checking account is designed for frequent deposits and withdrawals—you can write checks, use a debit card, and move money in and out without limits. A savings account is designed to hold money and earn interest; most banks limit how many times per month you can withdraw. If you're receiving a refund and immediately spending it or moving it elsewhere, a checking account is more practical. If you're receiving a refund and want to hold it for a while, either works, though a savings account may earn you a small amount of interest.
Some people open a savings account solely to receive a refund, then transfer the money to a different bank, a credit union, or cash it out. This is a valid strategy if you distrust banks or prefer to keep money outside the banking system. Just know that it adds a step and may take an extra day or two.
What happens if you don't have a bank account
You can still receive refunds and payments without a bank account, but you'll use slower, more expensive methods. The IRS will mail you a check. Your state may mail you a check or issue a prepaid card. Insurance companies vary—some mail checks, some use prepaid cards, and some require a bank account.
A mailed check takes five to ten business days to arrive, depending on mail speed and processing time. Once it arrives, you have to cash it somewhere. If you have a bank account, you can deposit it for free. If you don't, you'll pay a fee at a check-cashing service, a payday lender, or a retail store that cashes checks. These fees typically range from one to three percent of the check amount. On a $1,000 refund, that's $10 to $30 out of your pocket.
Prepaid cards issued by government agencies are usually free to use for the first withdrawal or two, but fees apply after that if you keep using the card. They're faster than checks—usually two to three weeks—but still slower than direct deposit.
Banks and credit unions with low or no barriers to entry
If you decide you need a bank account to receive a refund, you have options beyond traditional banks. Many banks require a minimum opening deposit, a minimum balance, or charge monthly fees. Others don't. Credit unions often have lower barriers than banks, though membership requirements vary.
Online banks typically have no minimum balance and no monthly fees. They can't take cash deposits or provide in-person service, but for the purpose of receiving direct deposits, they work perfectly well. Examples include Ally, Charles Schwab, and Discover, though many others exist. You open an account online in minutes, receive your routing and account numbers immediately, and can set up direct deposit right away.
Credit unions often offer free checking and savings accounts with no minimum balance. You'll need to join the credit union first, which usually requires living or working in a certain area, belonging to a certain employer, or meeting another membership criterion. Once you're a member, opening an account is straightforward. Some credit unions let you join online; others require an in-person visit.
Traditional banks vary widely. Some offer free checking with no minimum balance. Others require a minimum opening deposit of $25 to $100 and charge monthly fees of $5 to $15 if your balance drops below a threshold. Before opening an account, check the bank's website or call to confirm the fees and requirements.
Using a savings account as a temporary landing place
Some people use a savings account strategically: they open one solely to receive a refund or payment, then close it or move the money elsewhere once the deposit clears. This works if you want to receive money by direct deposit but don't want to keep it in a bank long-term.
The process is straightforward. Open a savings account (or checking account—either works). Provide your routing and account numbers to the agency or company sending the money. Wait for the deposit to arrive. Once it does, withdraw the money in cash, transfer it to another account, or move it to a different bank. Then close the account if you want.
This strategy adds a few days to your timeline because you have to wait for the deposit to clear before you can move the money. It also requires you to open and potentially close an account, which takes time. But if you're uncomfortable with banks or prefer to keep your money outside the banking system, it's a way to still receive money quickly by direct deposit.
What to do if you can't open a bank account
Some people face barriers to opening a bank account: a history of overdrafts or fraud, no government ID, or no address. If this is your situation, you have limited but real options.
Second-chance banking programs exist at some banks and credit unions specifically for people who have been denied accounts elsewhere. These accounts may have higher fees or lower limits, but they're designed to be accessible. Call your local credit union or ask at your bank whether they offer a second-chance program.
Prepaid debit cards from companies like NetSpend, GoBank, or Walmart's MoneyCard don't require a credit check or bank account. You can load money onto them and use them like a debit card. Some government agencies will deposit refunds directly onto prepaid cards if you provide the card's routing and account number. This takes longer than a bank account but faster than a check.
If you have no ID, getting one is the first step. Your state's DMV or a local government office can issue an ID card (separate from a driver's license) for a small fee. Once you have ID, opening a bank account becomes possible.
Frequently Asked Questions
Can I use someone else's bank account to receive my refund?
Technically yes, but it's risky. You would provide their routing and account numbers, and the refund would go into their account. They could refuse to give you the money, or the money could be seized if they owe child support or have unpaid debts. For tax refunds, the IRS allows this only if the other person is your spouse or a tax professional you've hired. For other refunds, check the agency's rules first.
If I open a savings account just to receive a refund, will the bank charge me fees?
It depends on the bank. Online banks and many credit unions charge no monthly fees and have no minimum balance, so you can open an account, receive your refund, and close it without paying anything. Traditional banks may charge monthly fees if your balance drops below a minimum. Check the bank's fee schedule before opening an account, or choose an online bank or credit union to avoid surprises.
How long does it take to open a bank account if I need one urgently?
Online banks can open an account in minutes, and you'll have your routing and account numbers immediately. You can set up direct deposit right away. In-person accounts at banks and credit unions take longer—usually one to three business days—because the institution needs to verify your identity and process paperwork. If you're in a hurry, an online bank is faster.
What if my refund is deposited but I can't access the account?
Contact the bank immediately. If the account is frozen, locked, or closed, the bank may be able to reverse the deposit and reissue it as a check. If the account belongs to someone else, contact both the bank and the agency that sent the refund. The sooner you act, the easier it is to fix.
Do I lose money if I transfer my refund from one bank to another?
No, bank-to-bank transfers are free. You can move money between your own accounts at different banks at no cost. It may take one to three business days for the transfer to complete, depending on the banks involved. If you use a check to transfer money, you'll pay nothing, but it takes longer.