How to Choose a Bank

Banks provide a range of services from the simple (a safe place to keep your money) to the more complex: offering loans, retirement and investing advice. Picking the right bank will depend on your specific needs. Here’s a guide to make it easier to find the right banking fit.

Determine what type of account you need

The best banks generally offer different accounts with different requirements and fees. Some will pay interest while others won’t. Your first step is to figure out what kind of account meets your financial needs, but don’t be surprised if you end up opening more than one type of account. You’ll want to cover both your short- and long-term goals.

These are the most common types of accounts banks offer:

Savings accounts

Savings accounts are meant to be a place to stash money. You’ll usually earn interest on your savings, known as an annual percentage yield (APY), allowing your money to grow over time. Opening balance requirements are usually quite low. Some banks limit certain types of withdrawals to no more than six per month (ATM and teller withdrawals are not subject to this limit). A savings account that limits access in this way may not be practical if you need to withdraw cash on a regular basis.

You may find different types of savings accounts at the same bank — some called regular savings accounts, and others identified as high-yield accounts. The best high-yield savings accounts typically pay a higher APY compared to a regular account.

Money market accounts?

Money market accounts are a type of savings account. They typically offer a higher APY compared to a regular savings account. In many cases, these accounts offer the ability to write checks or access funds in the account through using an ATM or a debit card.

There are withdrawal limitations, just as with a savings account. The opening balance requirement may also be much higher than a regular account.

Certificates of Deposit (CDs)

A certificate of deposit is another type of savings account. With a CD, you lock in a fixed amount of money for a specified period of time that can range between three months and five or more years. A CD usually pays a higher interest rate than a savings account and is a good option if you want to build up savings for a large expenditure in the future.

You won’t be able to access your money until the CD matures, however, unless you pay an early withdrawal penalty. Depending on the bank, the penalty can be loss of interest or a percentage of the CD amount.

Checking accounts

Checking accounts are usually used for everyday banking. You can pay bills by writing checks, making a transfer or setting up automated payments. Checking accounts usually come with an ATM or debit card for easy access to your money and checkless payment options.

Most banks don’t pay interest on checking accounts. Those that do usually pay a minimal APY that is generally much lower than the interest rate you would earn from a savings account.

Find the right bank(s)

Just as with accounts, there are different types of banks. Keep an open mind when scouting the range of financial institutions. You don’t have to open all your accounts at the same bank if a particular bank doesn’t meet all your needs. You may find a better interest rate on a savings account at one institution and a better deal for checking at another. Don’t be afraid to mix and match when it makes financial sense.

National banks

National banks have a large network of brick-and-mortar branches throughout the United States. Most, if not all, also offer online and mobile banking, plus a wide array of products such as loans, credit cards and, in some cases, investment and retirement accounts. These banks also have their own ATM networks.

The APY on savings and checking accounts is usually very low compared to other banking alternatives, like online banks and credit unions. National banks also tend to charge higher fees and have minimum balance requirements. However, they offer in-person service that can be helpful should a problem arise.

Online banks

Existing solely on the internet, online banks have no physical branches. While this means you won’t have any personal interaction with a bank representative, the lower overhead means they can usually charge lower fees and pay a higher interest rate on deposit accounts compared to their brick-and-mortar counterparts.

Some online banks offer the same array of services as national banks, while others may offer a limited line of products. They also tend to have relatively large ATM networks to make up for the lack of branches. However, in many cases it is impossible to make cash deposits, meaning you’ll have to rely on wire transfers, direct deposits and mobile check deposits.

Credit unions

Credit unions are nonprofit, member-owned financial cooperatives that usually serve communities in a limited geographical area. They offer many of the same products as online and national banks, and aside from providing access to branches they also have an online and mobile presence. Since they are non-profits, they tend to pay higher APYs and charge lower fees than brick-and-mortar banks.

You need to join a credit union to bank with one. Joining is sometimes as easy as opening a savings account with a minimum deposit of $5 or becoming a member of a specific charity. Other times membership is limited to people who live or work in a specific area, or who are employees of affiliated companies.

Compare features and fees

Each bank or credit union has features that may be more attractive to you. There are also fees you need to learn about before settling on a specific account or banking institution. When choosing the right bank, you want to make sure the combination of features and fees best meets your needs.

Following are some of the more common features and fees to look into before deciding where to bank.

Bank features

APY

You’ll find higher interest rates paid on savings accounts, CDs and money market accounts at online banks and credit unions. Most checking accounts don’t pay interest. If they do, it usually isn't very high.

ATM network

ATMs provide easy access to your money without having to visit a bank or credit union branch, or if you’ve opted for using an online-only bank. ATM networks associated with national banks are usually located at bank branches and aren’t as large as those offered by online banks and credit unions.

Perks

Some banks and credit unions offer customers perks for opening an account or linking multiple accounts. These perks can include sign-up bonuses, waived fees or higher interest rates.

Insurance

You want to make sure your money is safe. Deposits made to most national and online banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum legal limit of $250,000 per account. There is no charge for this service, and banks that provide this insurance usually identify themselves as FDIC insured.

Deposits made to federal credit union accounts are insured by the National Credit Union Administration (NCUA) for the same $250,000 limit per account. Note that investment accounts are not insured by either the FDIC or NCUA.

Online and mobile banking

Most brick-and-mortar banks and credit unions allow their customers to access and manage their accounts either online or through a mobile app. This is a convenient way of keeping track of your finances whenever you want.

Personal safety features

With the advent of online and mobile banking, many banks and credit unions now offer enhanced safety features to prevent unauthorized access to your accounts. These features include biometric identification, such as fingerprint or facial recognition login, two-factor identification and password protection.

Bank fees

Minimum opening balance

Some banks require a minimum deposit to open a checking or savings account; others don’t. If you opt for a $0 opening balance account, keep in you’ll have to fund it within a period of time determined by the bank — usually within 60 days — or the account will be closed. Most online banks have no minimum opening balance requirement.

Minimum balance requirement

This is the minimum amount of money you need to have in the account each month or statement period to avoid paying a monthly service fee.

Monthly service fee

Also known as a monthly maintenance fee, most online banks and some national banks and credit unions won’t charge this fee. Financial institutions that do charge the fee also usually have ways for you to waive it, typically by meeting a minimum balance requirement or making a certain number of transactions per month.

Overdraft fee

This fee, charged by the bank if you spend more money than you have in your account, typically ranges from $25 to $36.

Many banks have recently decided to do away with this fee, opting to reject any charges that may overdraw your account, providing automatic overdraft protection through a linked account, or providing a 24-hour grace period to give you time to deposit enough funds to cover the deficit.

Paper statement fees

This is usually a minimal fee to print out and send a monthly paper account statement. The fee can be easily avoided by signing up for e-statements.

Stop payment fee

Usually incurred if you want to prevent a check or other form of payment from being cashed for any reason, these fees can range from $15 to $35, although some banks will offer the stop payment option free as a perk on some accounts.

Returned check or non-sufficient funds fee

Banks and credit unions may charge this fee if you write a check that bounces because you don’t have enough money in the account. Some online banks won’t charge this fee, however. How much you’ll be charged depends on the financial institution. Fees can range between $10 and $36 each time a check bounces.

Wire transfer fees

There are two types of wire transfer fees: domestic and international. You incur these fees when you either wire money to an account, usually at another financial institution or business, or receive a transfer. Fees typically range between $12 and $50, depending on whether it is domestic or international. Some online banks do not charge for domestic wire transfers.

Cashier’s checks fees

If you need to make a large payment, such as a down payment on a car or a house, you’ll probably opt for a cashier’s check. Basically, you’ll pay your bank or credit union the amount you want to pay and the bank will generate a check on its own account, providing a greater guarantee of payment than a personal check. The fee for a cashier’s check can vary between $8 and $15, and you may not be able to obtain one online.

Certified check fee

A certified check is similar to a cashier’s check, except it’s drawn on your own account. It is more secure than a personal check because it carries the signature of a bank representative and the bank guarantees the funds. Expect to pay around $15 for a certified check. Some banks and credit unions may not charge a fee.

Out-of-network ATM fee

You won’t be charged a fee if you use a bank or credit union’s ATM network. Expect to pay between $1 and $5 if you use an out-of-network ATM, as well as any ATM operator fees. Some banks and CUs will reimburse out-of-network ATM fees or not charge a fee at all, depending on the account type.

Bottom line

When choosing a bank or credit union, you want to consider the types of accounts, features and fees. The best banks will allow you to:

• Easily access your money
• Earn a high interest rate
• Pay low, few or no fees
• Meet your financial needs

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