How to choose a bank that fits your needs
Not all banks are created equal, so it’s a good idea to shop around and compare your options. Factors like the types of accounts you need, the fees you’re willing to pay, and how you prefer to bank can help you narrow down your choices.
“Banking is personal. You need to work with a bank that takes the time to understand you, your goals and what you want to achieve,” said Brian Gansauer, president of the southern region for Peoples National Bank.
Key takeaways
Start by identifying which accounts you need — checking, savings, CD or money market — since that drives every other decision.
Compare banks on fees, interest rates, ATM and branch access, digital tools, and customer service.
Always confirm the institution is covered by Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) deposit insurance, generally up to $250,000 per depositor, per insured institution, per ownership category.
You do not have to pick just one bank — many people keep checking at one and high-yield savings at another.
Start with the accounts you need
The right bank depends on which accounts you plan to open. These may include:
Checking accounts
With a checking account, you can deposit and withdraw funds as often as you’d like, subject to your bank’s terms. Most checking accounts come with a debit card that lets you make everyday purchases or withdraw cash from ATMs.
Savings accounts
A savings account is a place to park the money you don’t want to spend right away. You can use it to build an emergency fund or save for a short-term financial goal, such as a house down payment or upcoming vacation. You’ll typically earn interest on your balance.
CDs
A certificate of deposit (CD) gives you the chance to deposit your money for a certain period of time at a typically fixed interest rate with minimal risk. Terms can range from a few months to several years.
While you may earn more interest than you would with other types of bank accounts, you’ll generally need to leave your money in the CD until maturity. Otherwise, you may be on the hook for an early withdrawal penalty.
Money market accounts
A money market account is a blend between a checking and savings account. You may earn a higher interest rate than with a savings account, but you’ll sometimes have to meet a higher minimum balance. Some money market accounts include debit cards and checks but may limit the number of withdrawals you can make each month.
Understand the types of banks
As you do your research, you’ll likely come across four main types of financial institutions, including:
National banks
A national bank is chartered by the federal government. Some operate extensive branch and ATM networks, while others have a more limited physical presence. These types of banks typically offer a variety of products and services, so they’re worth exploring if you have diverse financial needs as an individual or you own a small business.
Online banks and neobanks
An online bank or neobank lets you perform many banking activities online or via your mobile device. While most online banks don’t have a physical presence, their lower overhead costs often lead to competitive rates, lower fees, and other perks you might not find elsewhere.
Unlike chartered banks, neobanks are generally financial technology companies that partner with banks to provide banking services. If you’re considering a neobank, verify where your deposits are held and whether they qualify for FDIC insurance.
Credit unions
A credit union can offer attractive terms, lower fees, and personalized customer service. However, you must meet certain membership requirements to join and use its services.
Community banks
A community bank serves a specific geographic area. It’s similar to a credit union in that it’s known for personalized customer service. Most community banks are also heavily involved in community initiatives and have extensive knowledge of the local area.
Factors to compare when choosing a bank
When you shop around and research different banks, be sure to compare these key features.
Fees
Common banking fees include monthly maintenance fees, overdraft fees, and paper statement fees. If possible, go with a bank with minimal or no fees. Credit unions and online banks typically charge lower fees than traditional banks.
Interest rates
If saving money is a priority, interest rates should be top of mind. Choose a bank that prides itself on competitive interest rates. Compare annual percentage yields (APYs), which account for compounding, to evaluate potential earnings across accounts.
ATM and branch access
You shouldn’t have to go out of your way or pay a lot to withdraw or deposit cash. That’s why it’s a good idea to find a bank with a large ATM network as well as one that allows for free withdrawals or reimburses you for withdrawing funds at out-of-network ATMs.
Digital tools and mobile app
If you prefer online banking or banking on the go, prioritize banks with digital tools like online account access, mobile apps, and digital banking assistants. Fortunately, these are widely available.
“Technology is a part of banking today. Customers should look for tools that are easy to use, secure and make managing money easier,” Gansauer said.
Customer service
Customer service is important, especially if you plan to bank with a certain financial institution for a while. Choose a bank with reliable and prompt service that’s available through various channels, including phone, email, live chat, or social media.
“The right banking relationship is built on trust. You want a bank that is invested in helping you make decisions through excellent customer service, not a bank that merely processes transactions,” explained Gansauer.
Minimum balance requirements
Some banks require you to keep a certain amount of money in your accounts.
A bank’s minimum balance requirements should meet your financial habits. If they don’t, continue your search.
Sign-up bonuses and promotional offers
Sometimes, banks will reward you with sign-up bonuses or other promotional offers. While you shouldn’t choose a bank solely based on them, they can help you decide between two similar options.
Bank values and community involvement
Every bank has its own core values, and some are more involved in the community than others. If these factors matter to you, consider how a bank’s practices and community involvement align with your priorities.
Security and FDIC/NCUA insurance
Although bank failures are uncommon, choosing a bank that’s FDIC-insured or a credit union that’s backed by the NCUA is vital. Doing so will protect your eligible deposits. Don’t forget to look for strong security measures like multi-factor authentication, encryption, and fraud monitoring.
How to choose a bank in 5 steps
Follow these steps to determine the ideal bank for your specific situation.
1. Define your banking needs and must-have features
Figure out what you need from a bank. This may be access to a high-yield savings account, in-person banking, or 24/7 customer service.
2. Compare fees, rates, and FDIC/NCUA status at three to five banks
Then, find several banks that check off all your boxes. See how similar their features are.
3. Test the mobile apps and customer service
Do a trial run with a bank that seems like a good fit. Download and explore its mobile app and reach out to its customer service department to gauge how they handle questions and problems.
4. Open and fund your account
If you think you’ve found the right bank, go ahead and open your account. In most cases, you can do so online with a small electronic deposit.
5. Move direct deposits and recurring payments, then close your old account
Make sure your new account is set up to receive direct deposits and make recurring payments. If you have an old account, keep it open until you’ve confirmed all transactions are complete.
How to switch banks
After you find a bank that fits your banking goals and personal preferences, you may want to switch from your old bank to avoid confusion and missed payments. Here’s how to do so:
Open and fund the new account first
Before you close your old bank account, make sure the new one is up and running. This way, you’ll have somewhere to transfer your money and prevent disruptions in automatic payments, direct deposits, and cash access.
Move direct deposits and automatic payments
Once the new account is good to go, use a switch kit (if your new bank offers one) to find all your recurring deposits and payments. Wait a few billing cycles to ensure everything has transferred over before you close your account.
Keep both accounts open during the transition
It’s smart to keep a cash cushion in your old account for one to two months. By doing so, you can avoid overdrafts and cover any automatic payments that haven’t been transferred over to your new account yet.
Close the old account
After you confirm all your deposits and payments have successfully transferred over to your new account, go ahead and close your old account. Transfer any remaining funds and ask your bank for written confirmation that the account is closed.
Can you use more than one bank?
You may open accounts at multiple banks and take advantage of different account perks and features. For example, one bank may offer a competitive rate on its savings account and CDs, so you could go there for your savings needs. Another bank may advertise a new checking account bonus and fee-free ATM access, so you may choose it for your checking account.
Still not sure? Find your match
If you’ve done your research but are still unsure of the right bank, check out our Bank Match quiz. Once you answer a few questions, it’ll recommend some options that make sense for your particular situation. It’s free and a great way to take the guesswork out of choosing the ideal bank.
Frequently asked questions about choosing a bank
What are the most important factors when choosing a bank?
Key features to consider when choosing a bank include rates, fees, digital tools, and customer service. FDIC or NCUA insurance, as well as security features, are important.
Is it better to bank with a big bank or a credit union?
A big bank may offer more products and services, but fees vary by institution. A credit union, on the other hand, may offer a more personalized service experience and fewer fees, but you’ll need to become a member to take advantage of it.
What is the $3,000 rule for banks?
The $3,000 rule generally requires banks to verify and record identifying information when a customer purchases certain monetary instruments, such as money orders, cashier’s checks, or traveler’s checks, with $3,000 to $10,000 in cash during one business day.
What is the $10,000 rule with banks?
When a customer’s cash transactions exceed more than $10,000 in a single business day, the bank generally must file a Currency Transaction Report (CTR) with the Financial Crimes Enforcement Network (FinCEN). This can include cash deposits, withdrawals, or exchanges, as well as certain cash purchases of monetary instruments.
How many bank accounts should I have?
Your unique situation and goals will determine the right number of bank accounts. Most people, however, can benefit from having at least a checking account for everyday spending and a savings account for savings.
Can I open a bank account online?
Most banks let you open a bank account online. You’ll usually need a government-issued ID, Social Security number, and personal information, including your address. Additional documentation may be required, depending on the bank.
How often should I reevaluate my bank?
It’s a good idea to assess your bank when you learn about new fees or lower rates. You should also evaluate it when you move, get married, or experience any other life changes.
