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Key takeaways
- When choosing a bank, look for options with low or no monthly fees, competitive savings rates, and easy access to fee-free ATMs in your area.
- Traditional banks offer physical branches for in-person help, while online banks typically offer higher APYs on savings products and charge fewer fees.
- Verify that your bank has FDIC insurance to protect your deposits up to $250,000 per depositor, per ownership category, at each FDIC-insured bank.
Whether you’re opening your very first bank account or looking to switch banks, it can seem overwhelming to research and choose the best bank for your needs. With so many options available, how do you cut through the noise?
Below, we’ll cover what to look for in a bank, the different types of financial institutions and accounts available, and how to open your new account, so you can find your perfect match with minimal stress.
What to look for when choosing a bank
There are several factors to consider when choosing a bank: low fees, high savings rates, an easy-to-use website and mobile app, strong security features, and convenient ATM locations. Here’s what each of these factors means for your daily banking:
Low fees
Fees can add up fast, so look for accounts with little to no extra fees. Many modern banks offer accounts with no monthly maintenance or overdraft fees, making it easier to keep your hard-earned money in your pocket.
Others might waive monthly fees if you set up direct deposit or maintain a minimum balance, or they might offer fee-free overdraft protection. Traditional brick-and-mortar banks often have higher fees than online banks.
High interest savings rates
The annual percentage yield (APY) on your savings account determines how much interest you earn on your money. Look for a bank that offers a high-yield savings account to maximize your savings faster.
Also, look for built-in tools to help make saving easier. Features like automatic savings and roundups can help boost your savings balance with minimal effort. Even small amounts can build up over time.
User-friendly online access
Your money should be easy to access and manage. Before choosing a bank, look into its website and mobile app to see how user-friendly they are. Check ratings and reviews carefully to ensure you can handle your finances without always visiting a physical branch.
Bear in mind that online reviews typically skew negative – people who have a bad experience are more likely to leave a review than those with good experiences. You can also ask friends and family for recommendations on which accounts to consider (and which to avoid).
Strong security
When you’re trusting a financial institution with your money, you want to know that it’s secure. Check that the banks you’re considering are backed by the Federal Deposit Insurance Corporation (FDIC), which insures your balances for up to $250,000.
If you’re considering an account at a credit union, look for share insurance coverage from the National Credit Union Administration (NCUA), which also insures deposits up to $250,000.
ATM access
If you withdraw cash frequently, you’ll need to have easy access to fee-free ATMs so you don’t rack up fees. Traditional banks usually have their own ATM networks, while online banks typically partner with ATM networks like Allpoint or Moneypass.
Head to the financial institution’s websites and enter your ZIP code to see ATMs near you. As you compare options, consider the size of the ATM network and whether the financial institution offers fee-free ATM access.
The different types of financial institutions
You have several types of financial institutions to choose from, each with different features and benefits:
Traditional banks
Traditional banks are brick-and-mortar institutions with branch locations. Many of the “big banks” fall into this category.
These retail establishments offer various financial products and services, but they may have monthly maintenance fees, minimum balance requirements, overdraft charges, lower savings rates, and ATM fees.
Credit unions
A credit union is a non-profit organization owned by its members. Credit unions offer many of the same products and services as banks, but often have lower fees and higher interest rates.
Eligibility for credit union membership is typically based on an occupational, associational, or community common bond, such as where you work or live.
Online banks
Online banks are financial institutions that primarily offer online and mobile banking, with no physical locations.
Because they do not operate physical branches, online banks typically offer higher interest rates on savings products and charge fewer fees than brick-and-mortar banks.
Neobanks
A neobank is a financial technology (fintech) company that offers banking services in partnership with an FDIC-member chartered bank.
The appeal of neobanks often lies in their innovative features and lower costs, making them popular with people dissatisfied with traditional banking services.
| Institution type | Best for | Key features |
|---|---|---|
| Traditional banks | Face-to-face service | Physical branches, full product suite, may have higher fees |
| Credit unions | Lower fees and rates | Member-owned, competitive rates, membership required |
| Online banks | Higher savings rates | No physical branches, lower fees, higher APY |
| Neobanks | Mobile-first banking | App-based, innovative features, FDIC-insured through partner banks |
What types of bank accounts can you open?
There are several different types of bank accounts you can open. The best one for you depends on your goals, but you may want to open a mixture of accounts.
Checking accounts
A checking account holds funds that you can spend on everyday purchases. You can use your 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 money from an ATM when you need physical cash.
Some checking accounts come with paper checks and features to transfer funds to others. If that’s something you need, make sure the account you’re considering offers these features.
Savings accounts
A savings account lets you save money to fund a specific financial goal. One common use for a savings account is an emergency fund, but you can also open one to save for a down payment on a house, a dream vacation, or holiday gifts.
Savings accounts earn interest, which helps you grow your money over time. Banks sometimes limit the number of monthly withdrawals you can make from a savings account – so if you expect you’ll need to make frequent withdrawals, make sure the bank you’re considering will let you.
Certificates of deposit (CDs)
A certificate of deposit is a time-bound deposit account where you lock in your money for a set period in exchange for a fixed interest rate. A CD term could range from a few months to several years.
When the CD matures, you can withdraw your original deposit plus the interest earned. You can use the money to fund a savings goal, or roll it into another CD with a new term.
CDs can potentially offer competitive interest rates, but you might pay a penalty fee if you withdraw money early.
Money market accounts
A money market account combines features of both savings and checking accounts. They typically offer competitive interest rates and may include a debit card or check-writing privileges for withdrawals.
Keep in mind that, like with a savings account, you may be limited in how many withdrawals you can make per month.
Choose a bank with your must-haves
Finding the right bank starts with knowing what you need. Ask yourself these questions when researching options:
- Monthly fees: Is there a monthly account fee, and can you waive it?
- FDIC insurance: Are your deposits protected up to $250,000 per depositor, per ownership category, at each FDIC-insured bank?
- ATM access: Are there fee-free ATMs or branches near you?
- Mobile banking: Does the bank offer a well-reviewed and user-friendly mobile app?
- Interest rates: What APY can you earn on savings accounts?
- Special features: Are there cash back rewards or automatic savings tools?
- Customer service: Can you reach a real person when you need help?
Write down your top three or four most important features and compare your options side by side. Which one has fewer fees? Which one has more fee-free ATMs where you live? That will help you pick the best financial institution for your needs.
How to open your new bank account
Once you’ve picked the right bank for you, opening an account is usually a simple process. Here’s what you’ll typically need to do:
- Get your info ready. You’ll probably need a government-issued ID, such as a driver’s license or passport, your Social Security number, and possibly a recent utility bill as proof of address.
- Fill out the application. You can often do this online in just a few minutes, or visit a branch (if available) and have someone help you.
- Fund your new account. Make your first deposit by transferring funds from another account, making a mobile check deposit, or cashing a check at a branch.
Take your next step in banking
There are many factors to consider when choosing a bank. But once you open your first account and start using all its features, you’ll be glad you took the time to research your options and find the right bank for you.
If you’re ready to start building credit, consider opening one of the best starter credit cards at the same time you open your bank accounts.
Frequently asked questions about how to choose a bank
What should I consider when choosing a bank?
Consider fees, interest rates, ATM access, mobile banking quality, FDIC insurance, and customer service availability. Compare these features across traditional banks, credit unions, online banks, and neobanks to find your best fit.
What's the difference between a bank and a credit union?
Banks are for-profit institutions owned by investors, while credit unions are non-profit organizations owned by their members. Credit unions may offer lower fees and higher interest rates, but membership is typically based on where you work or live.
Is an online bank a safe choice?
Yes, online banks are safe when they are insured by the FDIC, which protects your deposits up to $250,000. Always verify FDIC coverage and check for strong security measures before opening an account.