A bank account is an essential financial tool, and your bank is an important part of your financial life. Knowing how to choose a bank can help you find the best home for your money and select a partner that will make your life easier instead of harder.

There are many reasons why you may be considering how to choose a bank. You may be looking for your first bank account. You may have moved to a new location, or you may feel limited by your current bank’s services. Whatever your reason, putting some time into choosing the right bank for you can get you off to the best possible start.

What to Look for in a Bank

Before you can decide how to choose a bank, it’s important to understand the essential features that you’re comparing. Banks offer a range of services and features. Not all of them may be important to you, but knowing which ones are important to you will help you make the best choice for you.

Some of the things you should look at when comparing accounts are:

  • Minimum deposit/balance requirements – Some banks won’t let you open an account unless you can deposit at least $25, $50, or more. You might have to pay fees if your balance falls below that amount. Look for accounts with low minimums.
  • Monthly fees – Many banks charge a monthly fee to keep your account open. You can usually avoid these fees by jumping through a few hoops, but it’s better to find an account that has no fees in the first place.
  • ATM access – If you’re a frequent cash user, you’ll want to make sure your bank has a strong ATM network in your area. Bonus points if it offers reimbursements for ATM fees charged by other banks.
  • Interest – Most savings accounts and even some checking accounts pay interest on your account balance. The higher the rate, the more you’ll earn.
  • Online and mobile access – We do a lot of things online these days, and that includes banking. You want to make sure your bank account comes with an easy-to-use app and website.
  • Variety of services – Checking and savings accounts are just a couple of the services that banks offer. Many also offer lending services, business tools, investing, and more. There’s a serious benefit to having all of your financial life in one place, so think about whether a bank can meet your other financial needs,
  • Other perks – Some banks offer useful budgeting tools or other perks, like rewards on debit card purchases. If a bank offers perks that you’ll benefit from, that’s a good reason to consider opening an account.

There isn’t a hard and fast rule defining what banks you need and what type of bank is best for you. You’ll have to assess your personal needs and compare each institution holistically, considering all of these factors and focusing on the features that you most need.

Types of Banks

If you’re wondering how to choose a bank or considering moving to a new bank, there are a few types of institutions to consider.

Local banks

✔ Pros: Familiar with the local area and needs, personalized service

❌ Cons: Limited variety of services, worse apps and websites, smaller ATM networks

🏅 Best for: People with simple banking needs and who rarely travel

Local banks are smaller institutions that typically focus on a specific city, state, or region of the country. Because of their smaller size, they’re able to provide more personalized service to their customers. You might get to know the tellers at your local branch over time and they’ll get to know you.

This means that local banks may be willing to be more flexible, helping out customers who are on the cusp of qualifying for a loan or waiving fees here and there.

However, these banks are limited by their size. They may not offer the best online services and may not have all of the loan options or investing options you’re looking for. Their ATM and branch networks will also be limited to their service area, which can be a problem if you travel a lot.

National Banks

✔ Pros: National branch and ATM network, standardized accounts, variety of financial services

❌ Cons: Fees, impersonal service

🏅 Best for: People who can meet fee waiver requirements and who have typical financial situations

National banks, like Chase or Bank of America, operate all over the United States. They have massive networks of branches and ATMs, which means that you’ll never be far from somewhere that lets you access your bank account.

The drawback of that size is that you’re ultimately just another number in a spreadsheet. You won’t have much when it comes to forming a relationship with the bank. You’ll only have access to its standard accounts and other services, without much flexibility if you wind up in a pinch or an unusual situation.

If you’re just looking for a convenient bank that has locations everywhere, national banks are a solid choice, just don’t expect to get a helping hand when you need one.

Online Banks

✔ Pros: Low fees and minimums, high interest rates, more perks, great online services

❌ Cons: Fewer financial services, can make it hard to deal with cash

🏅 Best for: Tech-savvy consumers who don’t use cash frequently

Online banking has gained in popularity in recent years. According to Business Insider, more than 200 million Americans will use some form of digital banking services in 2022.

Online banks take digital banking to the extreme. They have no physical locations or branches, instead, operating purely over the internet. Customers never see a banker in person, doing all of their banking and borrowing from their computer or phone.

These institutions are a great choice for a specific group of people. They offer accounts with low or no fees or minimum balances and pay above-average interest rates. Many also offer ATM fee reimbursements so it’s easy to make withdrawals from anywhere.

However, few offer customers a way to deposit cash. Those that do usually rely on services like GreenDot, which can charge hefty fees. 

If you’re a digital native who rarely uses cash, online banks are great. People who prefer to work with physical currency might struggle to use these banks.

Credit Unions

✔ Pros: Owned by their members, personalized service, low fees, and high rates

❌ Cons: Very small footprints, may be slower than larger institutions, limited services

🏅 Best for: People who want personalized service or who have unusual financial situations

Credit unions operate much like banks. Customers can open checking or savings accounts and even get loans from credit unions. Despite their similarities, there is one key difference that sets the two apart.

Credit unions are owned by their members. Banks are owned by shareholders. That means that while banks operate for the benefit of people other than their customers, credit unions must operate in their customers’ best interests.

Every credit union must have eligibility criteria for potential members, such as living in a certain area or working for a specific employer. If you don’t meet those criteria, you won’t be able to open an account. There are some national credit unions that anyone can join: they have set up membership criteria that make them widely accessible, though there may not be a physical branch in your location.

Because credit unions work for the benefit of their members, they generally do a good job of providing personalized service. They’re also typically more willing to help people with unusual financial situations or who are facing hardships. That can mean waiving overdraft fees or approving loans for long-time customers who are on the cusp of having adequate credit.

The drawback is that credit unions are usually small, community-based institutions. It’s not unusual for a credit union just to have one or a few branches and a small ATM network, which can make withdrawals difficult. That’s fine if you stay in one location and you want personalized service. It may not be such a good thing if you travel regularly and have complex banking needs.

Can You Benefit From Using More Than One Type of Bank?

If you’re considering how to choose a bank, remember that you can choose more than one. Many consumers can benefit from having multiple bank accounts. There’s no rule stating that you can only open accounts at a single bank and that you must stay with that bank for life.

One common strategy that people use is to have a checking account with a physical institution, like a local or national bank, and a savings account with an online bank. You may even choose to have more than one account of each type.

You can use your checking account at the physical bank to handle cash transactions, depositing extra money whenever you have it on hand. At the same time, you can store your extra savings in an online savings account, earning a higher interest rate.

If you ever need to move money between the two banks, an online funds transfer takes just a few days.

💡 This lets you get the best of both worlds: the high rates of online savings accounts plus the ability to deal with cash and the large branch and ATM network of a national bank chain.

Making Your Choice

Once you decide what type (or types) of bank you want to use, you’ll have to select a specific institution. You’ve narrowed down your options, now you have to look at the details.

Start by thinking about what account or accounts you want to open, and how you plan to use them. Knowing what you need is a key consideration in deciding how to choose a bank.

👉 For Example

Imagine that you are going to open a simple checking account where you will receive your salary and pay your bills. The interest rate won’t be a huge concern, because your balance won’t be large enough to accrue much interest anyway. You will want to look closely at minimum balance requirements, overdraft fees, and other fees you might incur.

If you are looking for a savings account where you plan to keep your emergency fund, the internet rate will be a greater concern.

If you expect to apply for loans or credit cards through your bank (remember that you will also have other options), check what the bank has to offer.

Assess a bank’s reputation, by word of mouth for local institutions, and online for national ones. Every bank will have some negative reviews – you can’t please everybody – but patterns of negative reviews may reveal issues.

If you’re looking at a local institution (most of us will keep at least one account at a physically accessible branch), there’s no substitute for paying a personal visit. Run through the list above under “what to look for in a bank”, and ask questions. You’ll get a sense of how the bank responds and how they treat customers

The Bottom Line

Each type of bank comes with pros and cons. For the best results, assess your specific needs carefully and consider opening accounts at several different institutions. You can combine their strengths by using each for the services that it provides most effectively.

Remember that there is no universal rule defining how to choose a bank or what is the “best bank”. Your job is to find the bank or combination of banks that best fits your needs. That can take some time and effort, but finding the right banks for your accounts can pay dividends in cost and convenience down the line!

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