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Whether you’re looking to manage your day-to-day expenses or grow your savings, you’ll need to understand how to choose a bank before opening an account. Selecting the right bank involves looking at various factors, including products, perks and fees. Follow these steps to find the best bank for you.
1. Decide which bank account type to open
Choosing the account type you want to open will help narrow down your search for a bank. Some of the most common types of bank accounts include:
- Checking accounts: If you need an account for everyday financial transactions, a checking account makes sense. A checking account comes with a debit card to use for purchases in stores or online. You can also make ATM withdrawals and write checks from the account as needs arise. However, know that you’ll likely earn little to no interest on your balance — these accounts are designed for spending, not saving.
- Savings accounts: A savings account is a good option if you want to build your nest egg to meet financial goals, such as making a down payment on a home or paying for a vacation. Savings accounts generally offer higher interest rates than checking accounts, making it easier to grow your balance. Keep in mind, though, that some banks may limit the monthly withdrawals you can make from a savings account without a fee.
- Money market accounts: Combining features of a checking account and a savings account, a money market account (MMA) often provides a higher interest rate than a regular checking account. MMAs typically come with a debit card you can use for daily spending while earning a decent rate on the balance — the national average in November was 0.60%, reports the FDIC. But the best rates may fall between 4% and 5%, according to DepositAccounts’ database of rates from thousands of banks and credit unions.
- Certificates of deposit: A certificate of deposit (CD) is an account that allows you to save money for a set period of time, known as a term. CD terms range from a few months to several years, depending on what you choose. In exchange for keeping your money in the account for a specific term, you receive a guaranteed interest rate — unlike savings accounts, which typically have a variable rate. However, withdrawing money from a CD before the term ends can result in early withdrawal penalties.
2. Explore bank options
Traditional banks
Traditional banks are usually large brick-and-mortar financial institutions, such as Bank of America or Chase Bank. These banks generally offer a wide range of products and services, as well as extensive ATM networks and physical branches. Most traditional banks also provide online and mobile banking options.
Who are they best for?
Opt for a traditional bank if you want to do your banking all in one place, prefer in-person service, and need access to many types of products and services.
What are the disadvantages?
Fees tend to be high at traditional banks, which have more overhead than online banks. Monthly maintenance fees are common, but you may be able to avoid them if you meet certain account requirements. (Still, these are extra hoops to jump through.)
Online banks
An online bank, like the name suggests, primarily operates through digital means. Many online banks offer mobile apps that allow you to perform various banking tasks, like transfers and check deposits, without visiting a branch. Examples of online banks include Ally Bank and Marcus by Goldman Sachs.
Who are they best for?
Online banks are ideal for people who like managing their money online and are comfortable using digital banking tools.
What are the disadvantages?
Online banks typically have limited or no physical branches and may have smaller ATM networks compared with traditional banks.
Credit unions
Credit unions are nonprofit financial institutions that are owned by their members — aka, the people who use their products. A credit union focuses on providing personalized service and building long-term customer relationships. Credit unions typically offer in-person banking, and some also provide robust online services.
Who are they best for?
Credit unions may suit people who value building personal relationships and supporting community-based institutions.
What are the disadvantages?
Credit unions generally have fewer branches and ATMs than traditional banks and may have a limited range of products. In addition, some restrict membership to certain groups of people or regions. For example, Navy Federal Credit Union is only open if you have ties to the armed forces, Department of Defense or National Guard.
3. Compare bank perks and features
Choosing the right bank involves identifying what matters most to you, such as digital tools and security features. Here’s a look at some of the benefits that different banks and credit unions offer:
| Bank | Perks and features |
| Ally Bank | Spending Account
|
| Capital One 360 | 360 Checking
|
| Alliant Credit Union | High-Rate Checking
|
| Discover | Checking
|
| USAA | Classic Checking
|
4. Review the bank’s terms and conditions
Terms and fees can vary between banks — which is why you should shop around before making a decision. Pay particular attention to minimum deposit and balance requirements, as they can affect your ability to open and maintain an account.
If a bank requires a minimum deposit, that means you’ll need to deposit a specific amount to open the account. For example, U.S. Bank’s Smartly Savings Account has a $25 minimum deposit.
With a minimum balance requirement, you’ll have to maintain a specific balance to keep the account or receive certain benefits, such as earning an advertised APY. Some banks will reduce your rate if your balance drops below a certain amount. Check your account agreement for more information.
5. Watch out for bank fees
Fees are, unfortunately, part of using a bank, though some banks have fewer fees than others. Common fees to look out for include:
- Monthly maintenance fee: Some banks charge a monthly maintenance fee to cover the costs associated with the account, such as operating expenses.
- Overdraft fee: Overdraft fees may occur when your account balance falls below zero.
- Out-of-network ATM fee: If you use an ATM outside of your bank’s network, you might be charged this fee, typically about $2.50 to $3.
- Foreign transaction fee: Your bank charges this fee when you use your debit card for a purchase in any foreign currency, whether made abroad or online. It’s usually a percentage of the transaction amount.
- Wire transfer fee: If you send or receive a wire transfer, you’ll typically pay a fee.
You can learn more about a bank’s fees in the account agreement or fees disclosure.
6. Read bank reviews
Checking bank reviews and ratings is worthwhile to gauge how other people feel about a bank’s products and services. If you notice patterns in the reviews, such as frequent complaints about unexpected fees or customer service, this can be a red flag.
Reading reviews can help you make an informed decision that aligns with your needs and expectations.
7. Pick a bank that fits your goals and lifestyle
Selecting a bank that aligns with your lifestyle and financial goals is important. For example, if you plan to start a business in the near future, perhaps choosing a bank with a variety of business banking services is the way to go.
On the other hand, if growing savings as quickly as possible is your priority, a bank that offers a high-yield savings account may make sense. And if you’re someone who travels often, you may want to consider banks with no foreign transaction fees.
If you’re struggling to choose one bank, you could always consider opening multiple accounts at different institutions. Just make sure you can keep everything organized and regularly monitor the accounts.