How to Choose a Bank

A bank account allows you to set aside money for future use. But there’s more than one type of bank account you can open. If you’re new to banking and personal finance, here are some of the main types of bank accounts.

There are different types of banks and financial institutions, and one may better suit your needs than another.

Checking accounts

A checking account is designed to hold money that you will spend. You can use a checking account to make online purchases or pay for things in person using a debit card. You can also use your debit card to withdraw cash at ATMs.

Some checking accounts come with paper checks that you can use to pay bills or make payments to friends and family. Some accounts include features to transfer funds from your bank account to someone else’s

Savings accounts

A savings account is a deposit account that allows you to add money, usually to fund a specific financial goal like an emergency fund. Savings accounts can earn interest, which allows you to grow your money.

Savings accounts are not intended for everyday spending. The purpose of saving is to hold on to your money until it’s time to use it. Banks sometimes limit the number of monthly withdrawals you can make from a savings account.

Certificates of deposit (CDs)

A certificate of deposit is a timed deposit account. Here’s what that means in simple terms:

• CDs let you deposit money for a set period of time.
• During that period, the bank pays you interest.
• At the end of the period, the CD “matures,” and you can then withdraw your original deposit plus the interest earned.

CDs can potentially offer competitive interest rates, but you might pay a penalty fee if you pull money from your CD ahead of its maturity date. Learn more about CD vs high-yield savings to understand the differences.

Money market accounts

A money market account is a type of savings account with some of the features of a checking account.

• Balances can earn interest, sometimes at higher rates than regular savings accounts or CDs.
• Your bank may give you a debit card to make withdrawals or purchases or allow you to write checks.
• You’re limited as to how many withdrawals you can make per month.

You might choose a money market account if you want to earn interest on balances but still have some flexibility in accessing your money.

When looking for a new bank, you have plenty of options. Options are all different when it comes to the products they offer or the features and benefits their customers enjoy.

There are different types of banks and financial institutions, and one may better suit your needs than another.

Traditional banks

Traditional banks are brick-and-mortar banks with branch locations. Many of the “big banks” fall into this category.

These traditional retail banks offer various financial products and services, but they may have monthly maintenance fees, minimum balance requirements, overdraft charges, and ATM fees.

Credit unions

Credit unions are like banks, but they’re non-profit organizations owned by their members. They offer many of the same products and services, but they may be able to offer lower fees and higher interest rates.

Credit union membership may be based on where you work, live, or other affiliations.

Online banks

Online banks are financial institutions that primarily offer banking online and on your smartphone and don’t have physical locations.

Because these online banks save money on physical locations, they can potentially offer higher interest rates on savings accounts while charging lower fees than traditional banks.

Neobanks

A neobank is sometimes technically not a bank. Instead, it’s a fintech company that offers banking services in partnership with an FDIC-member chartered bank.

The appeal of neobanks often lies in the fact that they’re not banks and appeal to people who may be dissatisfied with their past experiences using traditional banking services.

Many banks and financial institutions offer similar services, so it’s important that you understand what features to look for in a reliable bank. Consider the following features, services, and accessibilities:

Low fees

Overdraft fees, ATM fees, and monthly maintenance fees can add up. Keep in mind that traditional banks could potentially have higher fees than online banks and neobanks. If you’re looking to save money, prioritize an account with few or no fees.

High interest savings rates

Interest rates can be a big deal if you want to get more bang for your buck. Look into banks that offer a high-yield savings account with a high annual percentage yield, or APY. Even small amounts can build up over time.

User-friendly online access

With any institution, you’ll want to easily access and manage your money online. Look for a bank with an easy-to-use website and a helpful mobile app so you can handle your finances without always going to a physical branch.

Strong security

You want to keep your money safe. Check that the banks you are considering are backed by the Federal Deposit Insurance Corporation (FDIC). FDIC insurance means your balances are insured for up to $250,000.¹ For credit unions, look for National Credit Union Administration (NCUA) insurance.

ATM access

You likely want to choose a bank with ATMs in your area. As you compare bank options, consider the size of the ATM network and whether the financial institution offers fee-free ATM access.

Finding the right bank starts with knowing what you need. Ask yourself what’s most important to you when you’re researching options:

• Is there a monthly account fee? If so, how much is it, and are there ways to waive it?
• Are deposits FDIC-insured?
• Are there fee-free ATMs or branches near you?
• Can you use a mobile app? Is it well-reviewed?
• What kind of interest rates can you earn on savings accounts?
• Are there any special features, like earning cash back rewards or automatic savings tools?
• When is customer service available? Can you talk to real person?

If you have narrowed down your options, write down your top three or four most important features for a bank and compare the ones you are considering: Which one has fewer fees? Which one has more fee-free ATMs where you live?

Once you’ve picked the right bank for you, opening an account is usually a pretty simple process. Here’s what you’ll typically need to do:

1. Get your info ready. You’ll probably need a government-issued ID like a driver’s license or passport, your Social Security number, and possibly a recent utility bill as proof of address.
2. Fill out the application. You can often do this online in just a few minutes. If that option is not available, if you prefer, you can always visit a branch and have someone help you out.
3. Fund your new account. The last step is to make your first deposit. You can usually do this with a transfer from another account, a mobile check deposit, or with cash if you’re at a branch.

There are many details to weigh when you are choosing a bank, but once you open your first account and using all the features it has to offer you’ll be glad you took charge and took this important step in your financial journey.

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