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Question & Answer
Question: We're having a big discussion over whether to open DDA accounts for minors. In our state that would be for anyone under the age of 18. What's the risk, and are other banks doing it?
Answer: Yes, there is a risk, albeit probably not a huge one. And yes, other banks are opening accounts for minors. It's seen as a good marketing move, figuring there is a loyalty to the bank that first had faith in you! Some of us even remember the banker that used to come to grade school each week to collect money for our bankbooks and savings bond stamps!
Most states in the United States prohibit minors from entering into or signing a contract. But some, such as Virginia, also have sections that specifically allow minors to have a bank account. This almost contradicts itself, as our DDA accounts are considered to be contracts between the bank and the customer. Nonetheless, accounts are often permitted for minors by law.
Most accounts for minors are opened for the children of existing customers, and it is prudent to at least try to have the parent go on the DDA account as a joint holder. But if you have a minor that is making enough money to warrant an account on his or her own, your policy and procedures will provide your guidelines.
Copyright © 2000 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 10, No. 8, 8/00
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