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Choosing a financial institution that’s right for you isn’t as easy as picking one out of a hat. Sure, a lot of national banks, credit unions, and community banks have plenty of the same features, but one may differ from another where it’s important.
That’s why you must pay attention to what bank you’re considering joining before just signing the papers. Do your research.
See what fees you do and don’t want to pay. Look at the list of charges each institution may have. Look into the interest rates for specific loans. Think about how the bank will be beneficial to you now and how it will help you in the future.
Once you’ve done your homework correctly, you’ll be able to move forward and open a bank account.
Different Types of Banks
Before narrowing down your search, you’ll want to know that there are different types of banks.
Each is briefly mentioned and discussed below.
Online banks are growing in popular demand as they are the most recent development in banking.
Fortunately, and unfortunately, this type of financial institution is seen as a direct competitor for traditional brick and mortar banks. Why? Their overhead costs are much cheaper because they do not utilize a physical branch, and their fees are inadvertently not as expensive.
However, there are pros and cons of online banking. Depending on the type of person, you will depend on whether you prefer these institutions over traditional branches.
One of the most frustrating parts about strictly online banking is that it’s very difficult to get customer support on the phone – and it’s even more difficult (impossible) to talk to someone in person).
>> More: Best Online Banks
Often overlooked as a great option, these financial institutions are non-profits and member-owned, meaning they incur much lower fees for their customers and much higher interest rates on deposits made internally.
On the con side of things, credit unionsoften have very strict rules for their members when it comes to specific services – like how good of credit you need to apply for a personal loan.
Online banking features are not always inherent, either. If you often use your checking accountregularly, this option may not be your best for functioning reasons.
Brick and Mortar Banks
Traditional banks like these are typically what people think of when they hear the term “bank.” Brick and mortar institutions operate through a network of offices/branches and almost always provide access to ATMs 24/7.
Customers of the brick-and-mortar bank and others can use these ATMs. More recently, these traditional institutions have also signed up for online banking, allowing customers to pay bills and make deposits when they see fit in the comfort of their homes.
Unfortunately, traditional banks offer higher fees than their banking counterparts. But again, if you do your research well enough, you’ll be able to tell which option is best for your personal banking needs.
>> More: Best Bank Accounts
What Type of Bank Account Do You Need?
When identifying which banking institution to deposit and withdraw your money from, you might want to consider what range of accounts you’ll need to operate through.
If your goal is to save a ton of money at your new banking institution, opening a high-yield savings account would be the best move – you’ll find this best-fitting option at an online bank.
As long as the online bank is FDIC-insured, your money will be protected.
If you’re going to primarily use a checking account at your new banking institution, you may want to lean on the option that offers different types of checking accounts. In this case, traditional brick-and-mortar banks will have your back.
But if you prefer obtaining a high yield checking account, you’ll do better at a credit union or online bank.
>> More: What Is a Checking Account?
Money Market Accounts
These accounts are very similar to the traditional savings accounts, except they allow you check-writing privileges for a specific number of monthly transactions.
Certificate of Deposit (CDs)
If you’re looking to earn some extra interest at your new banking institution, lock up cash for a set amount of time in a certificate of deposit.
You’ll earn money back while the money is simply sitting there. If you need to access the money before the timeframe is up, that’s ok – but a penalty may be charged. Look into penalties and fees before locking up your money for a year, five years, or ten years.
>> More: How to Open a CD
How to Choose a Bank (Step-by-Step)
#1. Identify Your Financial Needs
Most adult financial needs consist of opening a checking and savings account. A checking account to monitor day-to-day spending, bills, and expenses, and savings account for vacations, emergencies, and big purchases.
You may also want to think about opening a money market account or putting your extra money that’s lying around into a CD.
Figure out your financial needs. Write them down if you have to. Decipher what kind of bank is the best for you from there.
#2. Compare Bank Accounts
After you’ve noted your basic and detailed financial needs, compare the types of bank accounts each financial institution has that you’re looking at. For instance, more traditional banks may have multiple types of checking accounts you can open.
#3. Understand Fees
Fees are one thing you want to stay as far away from if you can. Every bank has them, but they will also differ in the amount of money they take from you.
For example, look into the banks’ ATM fees – some banks have ATM fees one way or both ways.
Meaning you can withdraw funds from an ATM that’s not associated with your bank and find out later that you were charged a withdrawal fee and a home base banking fee. Keep an eye out for foreign transaction fees and card replacement fees, too.
#4. Safe and Helpful Technology
Safe and helpful technology can be a huge selling point for you if you’re switching banks or finally opening up a few accounts at your first bank.
For example, having access to a mobile banking app can make banking so much easier, giving you the ability to check your account and keep track of your money whenever you want to. Online transfers and optimum security measures are just a plus.
#5. ATMs and Branches
Having access to ATMs and branches is vital for some bank goers. Sometimes it’s just easier to head into a physical location and follow through with your transactions with a person face-to-face.
Other times, it’s easy to be a member at a widely known bank, allowing you access to a streamline of ATMs wherever you are in the world.
That’s why it’s so vital to know if you need to access an in-person bank or an ATM. If you’d much rather stay digital and you don’t ever really need cash, leaning on an online bank wouldn’t be the worst idea.
#6. FDIC or NCUA Insurance
Knowing and understanding that your money is protected and safe from fraud/identity theft is a big part of choosing the correct financial institution for you.
If the financial institution you’re looking at doesn’t have the safety capabilities to keep your money safely locked away, throw that option to the side.
With that being said, you’ll want to make sure that your money is completely insured. Traditional banks and credit unions are more often than not insured by the FDIC or NCUA.
Both organizations will cover your accounts up to $250,000. Just be sure to check the financial insurance status before committing.
How Do I Decide What Bank to Use?
Choosing the bank for you is such a personal decision, so flat out saying what to use to make your decision wouldn’t be fair.
Just keep in mind what matters most to you and then really look over your options in detail. Visit a branch or credit union if you must and get all your questions out of the way. It’s better that you’re confident in your decision than just picking and jumping right in.
Is It Hard to Open a Bank Account?
It’s not all that bad opening a bank account! You may need some basic documents like a valid ID, some personal information, and money to start the account up, but that’s just about it. The application itself is rather easy and can be completed in minutes.
But if you have any additional questions, just call the institution you’re looking to sign up with, and they’ll be able to answer all of your questions.
Bottom Line: How to Choose a Bank Account
Choosing a bank may be a tricky task but choosing the things that matter for you at a bank may not be all that hard. Before you choose a bank, consider the fees, online capability, and availability.