Updated on Friday, June 18, 2021
Whether youâ€™re choosing a bank for the first time or debating switching to a new one, there are multiple factors you should consider to ensure the bank you choose is the right one for you. Specifically, you should identify your own unique needs that youâ€™d like your financial institution to fill. Itâ€™s also important to look at items like fees and interest rates to set yourself up for financial success.
It can be tough to know where to start when choosing a bank, but answering the following eight questions can help you find the right financial institution for your needs.
Ultimately, there are pros and cons to each type of financial institution, making it important to identify your unique needs and look at which type of financial institution comes closest to meeting them. Here are the three main types of financial institutions youâ€™ll likely be choosing between:
When choosing a bank, itâ€™s important to identify the specific services youâ€™re looking for, and to then make sure the institution you choose offers them. Many banks offer a standard list of services, such as checking and savings accounts, debit and credit cards and mobile and online banking. Beyond these more standard services, a financial institution may also have offerings such as car and mortgage loans and financial advisory services.
You should also consider whether you want to do all of your banking with one institution or if youâ€™re comfortable working with multiple banks. It may be worthwhile to open accounts with multiple financial institutions if youâ€™re chasing the highest rates, for instance, or you want to devote an account to a certain purpose. On the other hand, you might value the ease of having all of your accounts in one place, as well as access to a broader range of services.
Once youâ€™ve determined the type of financial institution thatâ€™s right for you and which services youâ€™ll need from it, itâ€™s important to figure out the type of account you want to open. This decision will depend on your goals and how you plan to use the account.
Below are some common account types you may consider:
Be sure to investigate the kinds of fees a financial institution may charge you for different activities, such as overdrafting your account or using an out-of-network ATM, not to mention monthly maintenance fees you could owe simply for having the account.
An effective way to avoid fees is to look at your needs and typical banking habits, then pick an account that aligns with them. For instance, if an account requires a minimum balance in order to waive the monthly fee, make sure itâ€™s feasible for you to maintain. If having a higher minimum balance could be difficult for you, find an account with a low or no minimum balance.
The same goes for dodging overdraft fees and ATM fees. If you know you have a tendency to accidentally spend more than you have in your account, look for an account that doesnâ€™t allow overdrafts or at least offers overdraft protection. Similarly, some banks have broader ATM networks than others, or may even reimburse costs you incur from making out-of-network withdrawals.
Itâ€™s important to do your research and be aware of potential fees attached to certain activities to avoid surprise charges. The fees may look low at first glance, but they can certainly add up.
Itâ€™s also crucial to explore interest rates when youâ€™re choosing a bank to ensure youâ€™re getting the best rate available based on your needs. You want to make sure your money is working for you, not just sitting there.
You can usually find a financial institutionâ€™s current interest rates listed on their website. To determine just how competitive the rates are, it can help to take a look at a benchmark like the FDIC to see the current national average rates for a given account category.
Interest rates fluctuate from institution to institution, so itâ€™s important to do your research and shop around for your best rates. In general, the rates offered by online banks and credit unions tend to be the most competitive.
The technology offered by financial institutions can enhance your banking experience. Bank apps can include features such as mobile check deposit, budgeting tools, savings features, bill pay and more, making it easy to skip a trip to the bank and improve your financial habits.
Still, some banking apps are better than others. Itâ€™s going to be crucial that the app and website are user-friendly and easy for you to navigate, especially if your bank is online-only. In addition, security features such as two-factor authentication are vital to making sure your information stays safe.
Access to ATMs and physical branches can be an important feature to take into account when choosing which bank is right for you.
For instance, if youâ€™re planning on making frequent ATM withdrawals, itâ€™s important to choose a bank that minimizes fees while maximizing ATM access â€” otherwise, ATM fees could quickly add up. Some banks, however, may not charge you for using out-of-network ATMs or even offer reimbursements for the fees you incur from third-parties.
And even if a bank has a large number of branches, itâ€™s important to consider the proximity of the available ATMs and branches to where you need them if youâ€™re someone who likes to bank in person. Consider if any of those locations are convenient for you based on where you live and work. If you frequently travel to a specific location, are there ATMs there?
When researching which bank to choose, be sure to select one thatâ€™s insured by either the Federal Deposit Insurance Corporation (FDIC) (if itâ€™s a bank), or the National Credit Union Association (NCUA) (if itâ€™s a credit union). These two government agencies offer insurance of up to $250,000 per depositor, per institution, per account category. This will ensure that your money is safe up to the legal limits safe in the instance your financial institution were to fail.
Many financial institutions offer extra services beyond the standard checking and savings accounts that can add value for their customers. These advanced services can include financial advisory services, budgeting tools, 24/7 customer service, fee reimbursements and more. Reflect on your needs and research the different add-ons offered by banks to find the one that best fits your needs.
Choosing the best bank for yourself is a highly personal choice that depends on your financial goals and needs. Remember that the best bank isnâ€™t always just one bank â€” it could be multiple institutions for different services, and that it could be through a traditional bank, an online bank or a credit union.
Ultimately, youâ€™ll need to determine the financial services youâ€™re looking for and research which financial institutions offer them. From there, youâ€™ll want to compare your options to determine which one (or ones) would best meet your needs and expectations.
Once youâ€™ve gone through the above questions to consider when picking a financial institution, youâ€™ve hopefully narrowed your options. From there, take a closer look at fees and also look at a bankâ€™s rates to ensure your good rate isnâ€™t just a flash in the pan. You might also look at incentives like sign-up bonuses, which can tip the scale toward one institution over another.