Choosing a bank is a personal decision.
Everyone needs a bank account.
Checking accounts are required for many modern financial tasks, like receiving direct deposits or setting up automatic bill payments.
Opening a savings account is one of the best ways to start saving for the future. You also need a bank to get a mortgage or car loan.
It’s easy to understand why having a bank account is so important, but it’s harder to choose a bank.
There are thousands to pick from, so the process can be overwhelming. Here are some tips to keep in mind when choosing your bank.
How to Choose a Bank That Meets Your Needs
When looking for a new bank, think about what you really need. Are you searching for a bank that’s going to be a one-stop-shop for all of your financial services?
Are you happy with your current bank and just want to open a savings account at a different institution? Do you want a bank with free and easy ATM access?
Your answers will have a major impact on how you compare the different banks that you come across. If you don’t mind having accounts at multiple institutions, you don’t have to look so closely at each bank’s set of services.
Just compare each bank’s checking accounts, savings accounts, and so on, mixing and matching as you like. If you want to keep things simple and only work with one bank, you’ll have to look at things like relationship benefits and whether each bank offers all the services that you need.
Once you know what you’re looking for, you’ll be better equipped to compare your options.
Bank vs. Credit Union
Before we discuss the specifics of what you should be looking for in a bank, let’s talk about the differences between a credit union vs. a bank.
Credit unions meet many of the same needs as banks. They offer checking and savings accounts, loans, credit cards, and other financial services. What sets them apart is their organizational structure.
Credit unions are run for the benefit of their account holders whereas banks have shareholders that they must work for. This means that credit unions often have a leg up over banks when it comes to providing good service. They often have lower fees and higher interest rates.
Another benefit of this community-oriented approach is that credit unions might be more likely to work with you in unusual situations. If you run into financial trouble, you’ll probably have better luck making a deal to defer a loan payment or get a short-term loan.
The downside of credit unions is that they tend to be more local or regional than banks, which can be a problem for people who travel frequently or who may move in the future. Still, they’re a great option to consider. Keep credit unions in mind when looking for the right bank.
Brick and Mortar vs. Online
The other big divide in the banking world is between brick-and-mortar institutions and online banks.
Online banks have a number of benefits. They generally charge much lower fees and pay much higher interest rates than brick-and-mortar banks. They don’t have to maintain a large physical presence, so they cost less to run and pass those savings on to their customers.
If you’re looking for a full-service bank that can help with financial planning, lending, and other similar services, online banks might not be the best choice. If you simply want great checking and savings accounts, an online bank might be a good option.
What to Look for When Comparing Banks
There are a number of factors that you should look at when comparing different banks. Some of these elements will matter more to you than others.
When shopping around for a bank, take a look at the fees that each bank charges. Check out their flagship savings and checking accounts to get an idea of how much your relationship with the bank will cost.
Ideally, you’ll find a bank that has no monthly fees for any accounts. Some banks make it easy to avoid monthly fees by only requiring a simple direct deposit or small monthly balance. Other situations, such as overdrafts or bounced checks, will always come with some kind of charge.
2. Interest Rates
You’ll want to find a bank that pays a high interest rate on deposits but doesn’t charge excessive fees.
The good news is that banks that pay high rates on one type of account tend to pay good rates on their other accounts as well. If you find a bank with a high savings account rate, you can feel confident about the bank’s CD or even checking account rates.
One of the most important things to consider when choosing a bank is accessibility. In other words, quick and easy access to your money. If you live in Massachusetts, for example, you wouldn’t choose a bank with branches only in California, even if it has the best savings account in the country.
If you choose a brick-and-mortar bank, make sure there’s a branch where you live.
Look at each bank’s ATM network and make sure there are enough ATMs near places you visit. You don’t want to be forced to pay fees for using an out-of-network ATM. This is especially important if you withdraw cash frequently.
Some banks offer ATM fee reimbursement. When exploring bank options, look at how many times you can have your ATM fees reimbursed within a certain period.
In this day and age, almost every bank has an app or online banking platform. Even if you work with a brick-and-mortar bank, it’s nice to have the option to check your balance on your phone instead of logging in online.
You can usually get a good idea of how tech-savvy a bank is by visiting its website. If the website looks modern and is responsive, its app and online account services will probably be good. If the website is sluggish and difficult to navigate, you might want to reconsider.
Online banks tend to have the best apps and websites because they prioritize good user experience. If mobile banking is important to you, online banks should be at the top of your list.
Before you open any bank account, make sure that the bank you’re working with is insured.
The Federal Deposit Insurance Corporation (FDIC) protects banks while the National Credit Union Administration insures credit unions. Both organizations insure up to $250,000 per depositor, per account type at covered institutions.
If the institution that you want to work with is covered, you can feel confident that your money is safe. Don’t put any money in a bank that isn’t FDIC or NCUA insured.
Picking the Right Bank Matters
Choosing your bank is an important decision, but there’s good news: switching banks is easy. If you pick one and you discover it’s not the right fit, you can close the account and move on.
But we still recommend doing your research ahead of time to save the hassle of opening and closing multiple accounts.