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    How to Choose the Right Bank for Your Needs

    Ashley DonohoeBy 9 Mins Read

    Most of us know we need a bank but don’t always put in the work to find the right one. We’ll often get an account at the closest bank or sign up for one heavily advertised online. Sometimes that works out. Other times, doing that might leave you unhappy with the experience. You can also miss out on perks or pay expensive fees when you choose the wrong bank.

    Everybody’s situation is different, so you’ll need to identify what’s important to you in a bank. Maybe that’s low-cost accounts or good service. You’ll also need to know all your options and what to look for. Having changed banks a few times, I’ll walk you through some steps for choosing the right bank for you.

    Know Your Banking Institution Options

    Like many people, I opened my first bank account as an adult at the branch of a traditional bank in town. On the one hand, traditional banks are good if you like having many account options, getting face-to-face help, or doing transactions in person. The same goes if you use cash a lot. But a traditional bank’s fees and interest rates are often not great. That makes them less appealing to people who are saving or borrowing money. 

    Credit unions are a similar option you should consider. Many still have branches, but they’re often fewer and in more limited areas. The service is often more personalized since members own a part of the institution. Plus, you’re more likely to get better rates and fees. The catch is the membership requirement; you might need to live in a certain area or work for a certain employer.

    Maybe in-person banking isn’t that important. Online banks are a good alternative since they still offer help by phone or online. They also often feature lower fees and better interest rates than the other two options. You usually do have a smaller selection of accounts and access options, though. But 24/7 live support, local cash deposit locations, and large ATM networks can offset some of the drawbacks.

    Whichever one you choose, make sure your money will be safe there. For credit unions, you need to look for National Credit Union Administration (NCUA) insurance. Online and traditional banks should have Federal Deposit Insurance Corporation (FDIC) insurance. Institutions’ websites will usually note this.

    Compare the Different Fees

    Banks and credit unions can offer similar services and accounts but charge very different fees. It’s usually best to choose a bank that minimizes costs. Here are some main ones to compare:

    • Monthly fees: Many online banks don’t charge these, but other institutions might unless you meet some requirement, like keeping a minimum balance. These can be quite low at around $5 to $10 or exceed $25 per month. If you’re set on an institution that charges monthly fees, choose your account carefully. Premium checking accounts tend to have the highest fees. Then consider if you can reasonably avoid the fee. 
    • Overdraft fees: These often run up to $35 each and happen when your account balance falls short of covering a transaction. Many institutions offer overdraft protection these days, but that doesn’t mean you’ll always avoid fees. Some still charge a small amount to transfer the money. If you’re worried about shortages, look for a place that offers an overdraft grace period or free transfers.
    • ATM fees: I’ve avoided these so far since I only use ATMs part of my bank’s network. But you might pay fees both to your bank and the ATM owner for out-of-network transactions. It’s best to choose an institution with many fee-free ATMs where you usually go. Even better, look for one that offers rebates for possible ATM charges.
    • Wire transfer fees: While more rare, these can really add up. Bank of America says domestic wires can run you $20 or more, while international ones can run $35 or higher. I advise people to check whether a bank or credit union charges for incoming or outgoing wire transfers. Then see if there are any waivers or alternatives. I’ve used Zelle to avoid a wire transfer to a family member and saved money that way.

    You’ll also want to consider how you bank here since other fees can arise. If you write paper checks, those often aren’t free to order. And if you travel abroad, you’re looking at possible foreign transaction fees. Do a thorough comparison to find an institution with reasonable costs.

    Look for Competitive Interest Rates

    Interest rates are worth considering for most accounts and loans you’ll open. For deposit accounts like your savings, a higher interest rate is better since the credit union or bank is paying you. For credit cards and loans, lower is ideal since you’re paying the interest.

    The majority isn’t happy with their savings account rates, according to a recent WalletHub survey. If you’re looking at traditional banks and even many credit unions, these rates are usually uncompetitive. For instance, my traditional bank pays 0.01% for a savings account compared to 3% or more at one of the many online banks. 

    Looking for an institution with competitive borrowing rates is even higher stakes. You could be paying that rate for many years on a home or car. And credit card rates are high to begin with. Similar trends apply where online banks may charge lower rates than big banks. But credit unions also tend to be competitive. You should also check for any relationship rates.

    When comparing interest rates among credit unions and banks, also look at the national averages. The FDIC shows average deposit account rates. You can check Freddie Mac for current mortgage rates and the Federal Reserve for several other loans.

    Consider Customer Service

    This is important even if you usually do all your banking online and rarely contact a live person. You don’t want to run into a serious issue and suddenly learn your bank’s not a big help.

    Find out what support is available, including the types. Many offer phone, in-person, online chat, and/or email support. Then check the hours and days to see if they’re convenient. Many places also offer automated options. From my experiences with several banks, I’ve found automation more helpful for routine questions than major issues.

    Then read customers’ reviews online to learn about their experiences. But be careful. Look for patterns rather than write off a bank based on one complaint. If many people say the bank is rude or doesn’t fix their problems, that’s worth noting. But if one person complains of a rude banker at their local branch, I’d consider that less concerning.

    The latest J.D. Power studies on customer satisfaction are also worth checking. For traditional banks, check the retail banking study by region. The direct banking study is what you need for online banks. I like to stick with institutions scoring above J.D. Power’s averages.

    Don’t Overlook Conveniences and Perks

    While the factors above are important to most people looking for the right bank, you might also prefer an institution known for its conveniences and perks. 

    For example, mobile banking is the top option for over half (54%) of customers surveyed, says the American Bankers Association. If you’re in that group, look for a bank with a solid mobile app with high ratings (4.5+) on the app stores. It should at least let you conveniently do routine tasks, like depositing checks, moving funds, managing your debit card, and getting account alerts. You might also look for budgeting and savings tools or credit monitoring.

    When it comes to perks, consider which you can’t go without since they vary by bank. I value debit card rewards, early direct deposit, and loyalty programs. You might prefer travel perks or something else. But read the rules since you might need to open a high-monthly-fee account to get access. Those benefits aren’t always worth that fee.

    Stay Flexible

    Finding the right bank may require some testing. It might even mean you choose multiple institutions for different needs. I keep my checking account at a local bank where I can make cash deposits. But I use online banks for better rates on my savings. A similar combination might work for you. 

    As long as you minimize fees and get your needs met, don’t feel that you have to stick with one bank. Also, if one doesn’t work out, moving your money is fine and often a smart decision.

    FAQ

    Can I find banks that don’t charge any fees at all?

    Many online banks have accounts without the common fees, such as monthly maintenance or overdraft charges. But even they still often charge one-off fees for things like wire transfers. Some traditional banks and credit unions also offer accounts without monthly fees. But they tend to have more types of fees overall.

    Can the right bank for me change over time?

    Moving, getting married, or setting some new goal can all affect your banking needs. If you’re planning to buy something, for example, you might need a bank with low loan rates. And if you move, you might want something more local than your old bank.

    How often can you switch banks if one isn’t a good fit?

    There’s usually not a specific limit, though practicality is another thing. Moving your money back and forth and changing banking information gets tedious. Plus, an unusual banking history might make it harder to get new accounts at some point. 

    Our articles provide information purely for educational purposes and do not constitute financial, tax or investment advice.  You should always consult with professionals like licensed financial advisors or accountants before making any decisions.  We aim to provide up-to-date and accurate information, but we make no guarantees regarding the accuracy or completeness of any content.  All our examples are provided for illustrative purposes and may not reflect your personal results. We are not liable for any losses or damages arising from your reliance on the information provided.

    Sources:

    Ashley Donohoe is a personal finance educator with over 15 years of writing and editing experience. Whether she’s covering complicated tax laws or investment strategies, Ashley is skilled at breaking down complex topics with practical examples. Ashley holds multiple financial education certifications, including the Certified Financial Literacy Professional℠ (CFLP®) and Certified Financial Education Instructor (CFEI®) from the National Financial Educators Council. She also earned the Financial Planning & Wealth Management Professional℠ (FPWMP®) credential. She’s an IRS Annual Filing Season Participant and holds the Uniform Tax Certification. Her work has appeared on major websites, such as The Independent, CNN Underscored, MarketWatch, FinanceBuzz, Car and Driver, GoBankingRates, and Money.com. Ashley holds a B.S. in Multidisciplinary Studies and a B.S. in Accounting and Data analysis from Liberty University, and an M.B.A. from Western Governors University.

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