How to Choose a Bank (What to Compare Before You Open an Account)
Choosing the right bank can make managing your money easier, help you avoid fees and allow you to earn more in interest. You also need to consider ATM access, customer service, and if you want to bank online or have in-person options.
To choose a bank, start with comparing fees, interest rates, access, digital tools and insurance.
The Right Bank Depends on How You Use Your Money
When choosing a bank, consider interest rates, ATM use, your savings balance, and if you prefer online banking or in-person service.
Online banks are best for people who are comfortable banking from their devices and want higher interest rates on savings. If you prefer physical locations or need to deposit cash regularly, traditional banks may be the better route.
Instead of trying to find the “best” bank, focus on your preferences and habits.
1. Compare Monthly Fees and Hidden Charges
Bank fees can add up to hundreds of dollars per year — even if the account is marketed as free. This could come in the form of overdraft fees or the account may require a minimum balance to avoid a fee. If avoiding extra charges is a priority for you, look at the fee schedules of your top bank choices.
Common Bank Fees to Watch For
Fees are common among banks, and there are several kinds.
Look for:
- Monthly maintenance fee
- Overdraft fee
- Out-of-network ATM fee
- Minimum balance fee
- Paper statement fee
- Excess withdrawal fee (for savings accounts)
If you want to know more about how these fees work, read our guide to common bank fees and our tips on how to avoid overdraft fees.
Example: How Bank Fees Add Up
These fees may look small on an individual level, but they can seriously add up over time.
For example:
- $12 monthly maintenance fee = $144 per year
- 3 overdrafts at $35 each = $105
- 4 out-of-network ATM fees at $3 each = $12
That’s $261 in one year, not including minimum balance penalties.
2. Look at Interest Rates on Savings Accounts
A competitive APY is important for a lot of consumers because it can significantly increase your savings over time. If you’re looking to grow your savings, make this a top priority.
Some banks have high-yield savings accounts while others don’t. Traditional banks also tend to offer lower rates than online banks.
What Is a Good Savings APY?
What qualifies as a good APY depends on what’s typical among banks at the time. The average rate on a U.S. savings account is 0.39%, according to the Federal Deposit Insurance Corporation. High-yield savings accounts have APYs closer to 2%-5%.
APY — or annual percentage yield — shows how much interest you’ll earn on your money in a year. These fluctuate, so it’s important to verify rates before opening your account. Keep in mind they also can change even after you’ve opened an account.
Example: $5,000 in a Traditional vs. High-Yield Account
A higher APY will make a significant difference in how much interest you accumulate.
For example, if you deposit $5,000:
- At 0.05% APY, you’d earn about $2.50 in one year.
- At 4.00% APY, you’d earn about $200 in one year.
3. Decide Between an Online Bank, Traditional Bank or Credit Union
A traditional bank, credit union and online bank have different trade-offs. Understanding them can help you decide what’s best for you.
Online Banks
You usually get higher rates and lower fees with online banks because they don’t come with the cost of operating physical branches.
Pros:
- Higher APYs
- Lower or no monthly fees
- ATM fee reimbursements (at some institutions)
- More digital features
Cons:
- No in-person service
- Harder to make cash deposits
Traditional Banks
A traditional bank gets you the benefit of physical branches and face-to-face customer service.
Pros:
- In-person support
- Large ATM networks
- Wide range of financial products
Cons:
- Lower savings rates
- Typically more fees
Credit Unions
Credit unions are nonprofit, member-owned institutions.
Pros:
- Often lower fees
- Competitive rates
- Community-focused service
Cons:
- Membership requirements
- Smaller branch networks
Quick Comparison Table
| Feature | Online Bank | Traditional Bank | Credit Union |
|---|---|---|---|
Fees |
Often low |
Moderate to high |
Often low |
Savings interest |
Usually high |
Usually low |
Moderate |
Branch access |
None |
Yes |
Limited |
ATM access |
Large networks or reimbursements |
Large networks |
Regional networks |
Tech features |
Strong |
Moderate to strong |
Varies |
Generally, online banks offer higher rates and lower fees, traditional banks come with branch access and full-service offerings, and credit unions focus on member benefits and competitive pricing.
4. Check ATM Access and Branch Availability
It’s important to have easy access to your money. See how large a bank’s ATM network is and whether or not it reimburses out-of-network fees — especially if you visit ATMs frequently. You can usually find this information on a bank’s mobile app or website.
5. Review Mobile App and Digital Features
A decent mobile app is important, even with traditional banks, because most people do the majority of their banking online these days.
Look for:
- Mobile check deposit
- Online bill pay
- Real-time transaction alerts
- Budgeting tools
- Early direct deposit
Check Security Features and Account Alerts
Security features are a crucial part of picking a bank. Things like two-factor authentication and security alerts can reduce your risk of fraud.
Look for:
- Two-factor authentication
- Card lock or freeze controls
- Instant transaction alerts
- Fraud monitoring services
- Clear privacy policies
All institutions should have secure login protocols and make every reasonable effort to protect your data. Fraud and data breaches can still happen, but it’s important that your bank offers the security features you want.
6. Confirm FDIC or NCUA Insurance
When you choose a bank, make sure your money would be federally insured. Banks are insured by the FDIC (Federal Deposit Insurance Corporation). Credit unions are insured by the NCUA (National Credit Union Administration). That means if the institution fails, at least a portion of your money is protected. Coverage is typically up to $250,000 per depositor, per institution, per ownership category.
Always confirm insurance status directly with the institution before opening an account.
7. Consider Customer Service and Reputation
It may feel like customer service isn’t as important as the other factors, but it makes a world of difference to have a positive customer service experience. Especially when it comes to your money and livelihood.
Research:
- Better Business Bureau ratings and reviews
- Consumer Financial Protection Bureau complaint database
- Verified customer reviews
- Support hours — are they available 24/7 or only certain hours?
Every bank has some negative reviews. Look at consistent patterns or complaints related to your priorities in a bank. For example, say avoiding fees matters much more to you than customer service. You see most reviews for a bank complain about the fee schedule but rave about the customer service. Even with the positives, it might be best to avoid that bank.
How to Choose a Bank in 5 Simple Steps
Here’s an example of a checklist to follow when making a decision.
- Decide whether physical branch access is important to you.
- Compare fees and overdraft policies.
- Compare savings APYs.
- Check ATM access and reimbursement policies.
- Confirm FDIC or NCUA insurance.
- Research customer experiences.
To help you compare options, we have guides to the best checking accounts, best savings accounts and current bank promotions.
Frequently Asked Questions
These are some of the most common questions people ask when choosing a bank
The best bank for beginners is typically one with low fees, no minimum balance requirement and a mobile app that’s easy to use. Beginners may benefit from accounts that waive monthly fees with direct deposit, provide clear disclosures and accessible customer support.
An online bank can be a good choice if you’re comfortable banking digitally and want competitive savings rates. Online banks often offer lower fees and better APYs, but they typically don’t provide in-person service.
Credit unions can offer lower fees and competitive rates because they are nonprofit institutions. However, they may have membership requirements and fewer branches, so the better option depends on your needs and eligibility.
You should try to avoid monthly maintenance fees, high overdraft fees and out-of-network ATM charges whenever possible. Check the account’s full fee schedule before opening.
You can compare checking accounts by reviewing monthly fees, overdraft policies, ATM access, digital tools and minimum balance requirements side by side. Evaluating these features together makes it easier to choose an account that fits your habits.
Bottom Line
Choosing the right bank will depend on your own preferences and habits. What is the best bank for one person may not be the best bank for you. If you travel and deal with cash a lot, a traditional bank with widespread ATM access may benefit you. People who have simple banking needs and are comfortable banking from their phone may want to research online bank options.
Compare factors like APYs and other protections before picking a bank, then confirm the most current rates and fee schedule before opening an account. Doing enough research beforehand can make or break an experience with an institution.
