Your relationship with your bank is deeply personal, so finding the right fit is important. You wouldn’t introduce yourself to someone at a party and immediately share your checking account balance or the type of savings or investment plans you prefer to meet your personal finance goals, and you shouldn’t choose a bank based on just its ad on social media without doing some research first.
Finding the right bank can mean identifying your personal preferences in a variety of areas, then comparing Bank A to Bank B to Bank C to see which bank offers services that best suit those needs. Younger generations tend to go all in for superior mobile apps when it comes to banking, but J.D. Power has indicated that overall, American consumers prefer a more intimate approach to banking. A whopping 78 percent of those surveyed indicated that they opened their accounts in person at a brick-and-mortar bank.
Other significant differences exist among consumers as well.
First Things First
You can (and should) immediately rule out any banks that aren’t FDIC insured. That way if the bank you select should go out of business, it won’t take your money with it. With an FDIC-insured bank, the federal government guarantees that you’ll get it back, up to $250,000. You won’t want to bother comparing the features of a bank that doesn’t offer this protection.
Keep in mind that your bank doesn’t necessarily have to be a bank. Your financial institution of choice might be a credit union instead. Credit unions serve only their member, so they’re not available to the general public. You must qualify to become a member, usually by fitting into some demographic. For example, you might have to be a firefighter or first responder to be eligible. In exchange, you’ll probably pay less in the way of fees or even interest on loans you taken out.
Read More: Purpose of Credit Unions
Credit unions are federally insured up to $250,000 by the National Credit Union Administration, so your money is safe here as well.
What Products Are Offered?
A bank can be much more than a place where you park your cash until you need it. Ask yourself if this is all you need – just a place to put your money – or if you’re likely to want to take out a personal loan, a car loan or a mortgage in the foreseeable future. Not all banks offer the whole range of products.
Maybe it’s been on your mind to start saving for retirement, or you’ve begun worrying how you’re going to help your daughter pay for college. You might want to start your bank search by finding out which banks offer superior investment and savings products. Your daughter might benefit if you open a high-yield savings vehicle like a certificate of deposit rather than your average, run-of-the-mill savings account, or a money market account instead of a checking account. Money market accounts are something like a combination of checking and savings, and they pay superior interest rates.
Now compare those interest rates after you’ve narrowed down the available products. Most banks advertise their rates, and online banks tend to pay higher APYs than those with physical locations. But don’t assume that an interest rate you see advertised or that’s quoted to you is going to be a forever kind of thing. Sometimes really good rates are offered as promotions. They “expire” after a period of time.
What Services Are Offered?
You might want to stick with a larger, national bank if you just want to park your cash and pay your bills from the stash. They tend to offer more of a variety of checking account services and options. Look into ways the bank might help you avoid overdrafts if this is a misstep you foresee yourself taking once in a while. Some banks will text or email you with an alert if your balance is getting low, which can be really helpful.
Other banks will let you link your savings and checking accounts together. Money from savings can be automatically transferred to checking to prevent overdrawing your account if your checking balance runs low. And still other banks provide budgeting tools on their websites to help you avoid overspending.
Convenience, Relationship and Availability Factors
When was the last time you actually needed to speak to someone about your financial situation, maybe to ask for advice? Those big, national banks will no doubt offer you plenty of guidance, but you might feel like you’re back to announcing your net worth to a stranger you’re meeting for the first time at a party. These banks tend to be more impersonal than community banks, particularly in larger cities.
What time was it when you last balanced your checkbook only to realize that something wasn’t adding up? If it was 2 a.m., you might want to choose a bank with multiple contact options. You won’t be able to touch base with a branch manager at that hour no matter what bank you choose, but look into telephone customer support if this sounds like you. Can you get a human on the phone at the 1-800 customer service number 24/7? What about online chat? It’s worth looking into if you think you’ll want access to help other than during regular business hours.
Check into the availability of a bank’s in-network ATMs, too, particularly if you tend to require cash on the go or if you travel a lot. ATMs abound in almost every city and town these days, but you’ll end up incurring fees for your transactions if the machines aren't your bank’s ATM or if they're not part of a network your bank partners with. Of course, you’re always safe if your bank has a nearby brick-and-mortar location, because banks almost invariably have ATMs on the premises, so your bank’s physical location can be important, too.
Online and mobile banking apps tend to be particularly important to millennials – not just their availability, but their quality as well. Online-only banks usually offer the best options here, but these banks have no physical locations at all. You might find yourself out of luck if you actually want to meet with someone about your banking situation. Human contact with these banks is pretty much nonexistent.
Almost all brick-and-mortar banks offer something in the way of internet access these days, but an online-only bank might be the way to go if technology is important to you and you think it’s unlikely that you’ll ever want to meet with someone face-to-face. Keep in mind, too, that “online” doesn’t always translate to “mobile app.” Some online-only banks don’t offer mobile access, so check into this if you'll want to access your accounts on the go.
Available mobile and online features have expanded by leaps and bounds, so compare what’s being offered by each bank you’re considering. Some provide tools that allow you to lock your debit card so it can’t be used if it’s been lost or stolen. And there's no need to speak immediately to a bank representative because you can take this step to protect yourself. Still others provide ATM finders to help you dodge that in-network ATM problem. Visit each bank’s website to get a feeling for what it offers in the way of technological perks.
How Much Is This Going to Cost You?
Banking isn’t free. Banks are businesses, after all, and they want to earn money. They do this largely by lending money and by charging interest on those loans. Under federal law, they’re permitted to lend up to 10 times the amount of money they have on deposit, so they really want those deposits, and the more the better.
Banks want you to keep as much money on deposit with them as possible for this reason, so some impose minimum balance requirements. The best-case scenario is that your bank won’t pay you interest on your bank account if your balance dips below this threshold. Worse, it might charge you a monthly maintenance fee if you fall below the minimum balance line, to make sure they’re at least collecting some revenue.
Compare maintenance fees, minimum balance fees, ATM fees and overdraft fees when you’re lining one bank up against another. Online banks tend to be kinder when it comes to the costs and fees of maintaining accounts, again because they’re not shouldering up under the expense of maintaining brick-and-mortar locations.
Find out whether the bank refunds ATM fees if you get into a jam and have to use one that’s not in-network. Several do, particularly online banks. Look for free checking account options, too. As the name suggests, these accounts don’t carry minimum balance requirements or charge maintenance fees, even if you fall below the minimum balance threshold. This isn’t always the case, however. A bank that advertises "free checking" might actually mean, "It's free as long as you do this, that, or another thing.”
And again, make sure that the fees and costs you’re quoted aren’t just promotional numbers for the time being, or you’ll be hit with something a bit heftier after you’ve had your bank account for a while.
Don’t Overlook Overdraft Fees
Some fees and costs are pretty much unavoidable, such as a financial slap-on-the-wrist if you overdraw your checking account, and these can add up to a pretty significant piece of change. Depending on your cash management history, this might be a really important area to compare.
A Bankrate survey found that the average overdraft fee was $33.36 in 2019. The Consumer Financial Protection Bureau also puts it at about $34. Some banks offer overdraft protection, and they’ll transfer money from your savings to your checking account if you overdraw, but this comes with a fee, too – usually from $10 to $12 per event. You'll obviously want to look for the lowest costs.
The Bottom Line
It’s entirely possible that you’ll find you’re no closer to making a decision than you were before you did all this research. Maybe two or more banks really seem comparable. Your work hasn’t necessarily been in vain. No rule says that you can’t keep accounts at two banks or even more, tailoring their advantages to the type of account you want to open and the services you need.
Maybe Bank A has no maintenance fees for checking accounts and it offers a mother lode of in-network ATMs, but it pays negligible interest on savings vehicles. Bank B might be online-only and have super low fees and costs and pay decent interest, but its ATMs are virtually nonexistent. Consider opening a checking account with Bank A with all its ATMs, and a savings account with Bank B with that nice interest. If investment services or mortgage loans are important to you, consider keeping at least some money in an account with a bank that offers these services as well.
- Bankrate: 8 Tips for Choosing a New Bank
- Dave Ramsey: How to Choose a Bank
- Financial Wellness: How to Choose a Bank
- Business Insider: The 7 Things Millennials Should Look for to Avoid Choosing the Wrong Bank
- Northwestern Mutual. "Here's the Difference Between Banks, Credit Unions and Brokerages." Accessed April 6, 2020.
- Federal Deposit Insurance Corporation. "FDIC Community Banking Study," Page 1. Accessed April 6, 2020.
- Federal Deposit Insurance Corporation. "Learning Bank - Checking & Savings Accounts." Accessed April 6, 2020.
- Federal Deposit Insurance Corporation. "Five Things to Know About Safe Deposit Boxes, Home Safes and Your Valuables." Accessed April 6, 2020.
- U.S. Bank. "U.S. Bank Mobile App." Accessed April 6, 2020.
- Bank of America. "Bank Account Rates & Fees FAQs." Accessed April 6, 2020.
- American Express Company. "APY vs. APR: The Basics About How Interest Is Calculated." Accessed April 6, 2020.
- The Federal Reserve. "Regulation D1 Reserve Requirements," Page 1. Accessed April 6, 2020.
- Wells Fargo. "Debit Card Questions." Accessed April 6, 2020.
- Investor.gov. "Certificates of Deposit (CDs)." Accessed April 6, 2020.
- Ally. "6 Ways to Avoid Checking Account Fees." Accessed April 6, 2020.
- PNC Bank. "PNC Virtual Wallet Features and Fees," Page 1. Accessed April 6, 2020.
- Bank of Alma. "Checking With Choices." Accessed April 6, 2020.
- HelpWithMyBank.gov. "Answers About Funds Availability: I Opened a New Checking Account, but the Bank Will Not Let Me Withdraw My Funds Immediately." Accessed April 6, 2020.
- ChexSystems. "Frequently Asked Questions (FAQ's)." Accessed April 6, 2020.
- ChexSystems. "Common Mistakes to Avoid." Accessed April 6, 2020.
- Experian. "Why Was I Denied a Checking Account?" Accessed April 6, 2020.
- Consumer Financial Protection Bureau. "Helping Consumers Who Have Been Denied Checking Accounts," Page 2. Accessed April 6, 2020.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.