How to Choose a Bank

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Updated on Wednesday, April 17, 2019

While your bank appreciates that you’ve been loyal to them for ages, that doesn’t necessarily mean you’re benefiting from the relationship. The banking landscape is changing quickly — there are tons of new apps and lots of new technology that can make your banking life more convenient. All the competition means that bank fees are falling or going away entirely. Meanwhile, interest rates on deposit products are rising.

Given these facts, now is a great time to revisit your banking relationships and see if you can’t find a better deal. Unsure of where to start? Read on for some great tips on how to choose a bank.

Never pay fees

When you choose a bank, there is never any reason to pay fees for basic banking products. There are countless fee-free options available today: If you are paying a monthly maintenance fee or a minimum balance fee on any banking product, that means it’s time to shop around.

You should also avoid paying overdraft fees. While some banks charge you a one-time fee for an overdraft, some big banks charge fees each day your account is overdrawn. There are lots of checking account options don’t charge overdraft fees, going instead for other options.

Some banks will decline a transaction so you don’t overdraw on your account. You could also link your checking account to your savings account — if they’re both with the same bank — so money will be transferred between accounts in case you make an overdraft.

If you don’t have a great financial history, you may ultimately have to suck it up and pay some fees with a second chance account until you can upgrade to a better one down the line. Still, some of these accounts offer better deals that others, so do your due diligence.

Don’t be afraid of online banks

Online banks — also known as internet-only banks — lack physical locations you can visit to do your banking, with a few exceptions. Nearly all online banks only allow customers to access their accounts via the internet, on a mobile app or the bank’s website.

Online banks typically offer better rates on deposit products, as compared to conventional banks with many brick-and-mortar locations. You can easily compare rates online from the comfort of your own home and evaluate the features you need most.

While it can seem nerve wracking to hand over your cash to an online bank, it’s perfectly safe to do so. As long as the bank has Federal Deposit Insurance Corporation (FDIC) coverage, your money is safe just like it would be with a brick-and-mortar location. The FDIC insures individual bank accounts up to $250,000, so if your online bank goes belly up, your cash won’t disappear. Do your own research by checking the FDIC’s BankFind tool to see if an online bank is FDIC insured.

In addition, online banks take extra security measures to protect your money when using their website or app. Many have security measures like firewalls, browser encryption and regular fraud reviews. Some will even go as far as automatically logging you out due to inactivity, implementing regular account monitoring and two-step authentication for mobile apps. If you’re unsure, contact the online bank or check their online security measures on their website.

ATM access

If you’re concerned that you won’t be able to get ATM access with an online bank, don’t worry. Most offer ATM access, with the exception of some online savings accounts. Depending on the bank, you could get access to certain ATM networks all across the U.S.

For example, online bank Chime offers its customers surcharge-free access at more than 38,000 MoneyPass ATM locations. Other banks even offer ATM fee refunds if you use an out-of-network ATM.

When you choose a bank, keep in mind that you’ll be making lots of ATM withdrawals. Minimizing withdrawal fees and maximizing ATM access is key.

Who has the best apps?

If you want convenient access to your funds, then consider choosing a bank that offers a superior app experience. Most banks and credit unions that offer banking apps typically offer basic features such as the ability to check your balance and make mobile check deposits, as well as transaction alerts.

Many big banks offer a more intuitive banking experience by integrating rewards programs, budgeting software and access to your credit score. Some even offer the ability to send money to friends and family right inside the app — Zelle is a feature offered on many bank apps that lets you quickly and easily send money from your phone.

Before you choose a bank, look up the app on Google Play or the Apple App Store to see what features are offered on the app. Most online banks typically have basic features, so look at any screenshots featured on the website to predict whether their app will offer what you want.

Should you have more than one bank?

With so many convenient online banking options available, it may be worth opening different accounts at several banks, depending on your preferences and financial goals. If you prioritize simplicity and want everything in one place, choosing one bank may be the best option for you. However, it’s worth considering the advantages of multiple accounts at different banks:

  • Varying interest rates: Having accounts at different banks can allow you to take advantage of better interest rates. For example, your current bank may offer a great APY for savings accounts, but a low or zero APY on checking. In this case, you might choose a checking account with a bank that offers high interest rates on checking.
  • Free features: Different banks and credit unions offer features such as unlimited ATM refunds, free checks and more. Having accounts at multiple banks can help you take advantage of these features.
  • Sign-up bonuses: Although this isn’t on offer all the time, some banks offer sign-up bonuses to entice you to open an account with them. For example, some places will give you a one-time cash bonus if you meet their minimum deposit requirements.

Check out credit unions

Both banks and credit unions have advantages and disadvantages. When shopping around, look at all your options before deciding.

  • Product offerings: Credit unions sometimes offer better rates and fees, but may not offer as wide a variety of financial products compared to larger banks.
  • Rewards: Large banks typically have more enticing bonuses and rewards, though their offers can come with more fees.
  • Banking hours and locations: Depending on the size of your credit union, you may be limited to fewer branches and operating hours. Some don’t offer online access unlike banks.
  • ATM access: Credit unions usually participate in ATM networks like CO-OP and Allpoint, which offer large networks of surcharge-free ATMs.
  • Membership restrictions: Most credit unions require you to be a member, meaning you’ll need to meet eligibility requirements.

Deposit insurance: FDIC vs NCUA

As mentioned previously, the FDIC is an organization that insures your deposits up to $250,000 per account type. Currently it directly monitors and supervises around 4,000 banks in the U.S.

The National Credit Union Administration (NCUA) on the other hand, is an independent agency much like the FDIC, except that it watches over credit unions. The NCUA administers the National Credit Union Share Insurance Fund, meaning it insures deposits most state-chartered credit unions and all federal credit unions. It also insures up to $250,000 in deposits, just like the FDIC.

The bottom line

Understanding how to choose a bank that best suits your needs isn’t as cut and dry as walking down to your local branch. You want to shop online for your best rates, fee-free features and the most convenient access to your cash. When doing your research, make sure to choose a financial institution that is insured by either the FDIC or NCUA so that your deposits are safe.

After all that’s said and done, the perfect bank for your comes down your individual needs and wants. If you want better rates, an online bank may be your best bet. However, if you prefer in-person service, you could be better going with your local credit union.