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How to Choose a Bank

Deciding which financial institution to entrust your money to is one of the most important choices. The level of service, fees, and interest rates different banks offer can vary greatly.

This means that choosing the best bank for you is rarely a one-time process and that the best bank for you will likely change throughout your lifetime as your financial and investment goals evolve. One useful piece of advice is to remember that there is no limit to the number of bank accounts you can hold, nor how frequently you swap one bank for another.

Just as you diversify your investments, you can get the most from your money by diversifying your bank accounts. The three most important factors in choosing a bank for checking and savings accounts are the type of bank, the rates and fees it charges, and the extra features it offers.


Types of Banks

The first and most fundamental factor in choosing a bank is the type of institution that is right for you. There are at least three distinct types of the financial institution that can reasonably be referred to as a bank. Each of them offers a unique set of advantages and disadvantages.


Traditional banks

Most people think of traditional banks when they think of a bank. These banks largely offer their services to customers through a network of brick-and-mortar offices and provide ATMs to their customers and those of other banks. Many banks have also started offering online banking services for paying bills and making deposits.

Although traditional banks have been around the longest, there are fewer reasons to choose them over their online competitors or credit unions today. As we’ll see, both institutions offer lower fees than traditional banks.

If you have a question or a problem, you can go into your local branch and talk to someone about it; that said, you may prefer to do your banking in person. However, it is still worthwhile to check out the other options available to you.


Online banks

Twenty years ago, online banks were rare, but their popularity has grown, making them competitors for traditional banks today. Because online banks have fewer or no physical branches, their overhead costs are much lower than traditional banks, which means their fees are also typically lower.

Many people find the customer services offered by purely online banks frustrating. Although the best online banks now offer extensive customer support options, you still won’t be able to walk into a branch to talk to a bank employee in person. The industry is aware of this.

The line between online and traditional banks has become increasingly blurred in recent years, as traditional banks have become more advanced in their digital services and tools. This means that you may enjoy the advantages of a traditional branch while still accessing the convenience of digital banking.


Credit unions

Despite being often overlooked, credit unions have advantages that make them a good choice compared to traditional and online banks.

First, credit unions are not-for-profit financial cooperatives. This means they are member-owned, and profits are returned to their members via lower fees and higher interest rates on deposit accounts. Publicly owned traditional banks are accountable to shareholders and must meet revenue goals.

Second, most credit unions maintain genuine relationships with their local communities and maybe the natural choice for you if you want a bank that gives something back to your community.

However, not all credit unions have fairly stringent rules for members to access services, and some don’t offer features like online banking. This may make one a less-than-optimal choice for a checking account you need to access and work with regularly.


Fees and Interest Rates

Most people will have two basic accounts: a checking account and a savings account. It often makes sense to have these accounts at different institutions; the features you need for each type of account will vary. Another factor to consider in choosing where to bank is an institution’s fees and the interest rates it offers.


Fees you should know

Many banks charge a monthly fee to maintain a checking account, but the fees charged by each bank can vary significantly. Some banks may waive or lower these fees if the account holder meets certain criteria, such as maintaining a minimum balance or setting up direct deposits for paychecks.

It’s important to understand a bank’s common charges for using a checking account to keep these fees at a minimum. These common charges may include:


  • Monthly maintenance fees
  • Overdraft fees
  • Statement fees
  • Stop payment fees
  • Returned check fees
  • Wire transfer fees
  • Cashier’s check fees
  • Certified check fees
  • Out-of-network ATM fees


The largest distinguishing factor among checking accounts is the fees. All else, you should choose the checking account with the lowest charges.


Interest rates

When looking for a savings account, consider a different set of features than you would for a checking account. You shouldn’t need to access a savings account as frequently as you do a checking account, so it’s unlikely that you will need an app or online banking services. Savings accounts usually don’t have high fees as long as you don’t make many withdrawals.

Instead, the primary way that these deposit accounts differ is in the interest rates they offer. These can vary widely, and credit unions or online banks often offer the best rates. The best interest rate for your savings can be found by shopping around.


Extra Features

However, most banks will also offer a range of other services, discounts, or features that may be crucial for you – two factors we’ve considered so far being the type of institution you choose and the amount it will cost you in fees or lost interest, which are the most fundamental aspects of choosing a bank.

Think about how you use your accounts and where you are losing money in fees or time, then look for a bank that’s a better fit. Important factors might include, but are not limited to:


Most banks now offer online and app-based banking. An online service with many features can save time using your account to set up new payments or manage standing orders.

There may still be times when visiting a branch is easier, even if you deal with your bank primarily online. Many people require a local bank branch for their checking account, in a similar way that a network of ATMs may be important to those who travel frequently and need ready access to cash.

Though most banks are insured against loss, they still vary in the level of security they offer for online services. A quick news scan to see which banks have recently experienced security breaches may help you rule out a bank.


Many people still make their bank decision based on the company their parent’s bank with or merely because they trust the name and reputation of a large national bank—this last point is related to another. Arguably, the most important service any bank offers is peace of mind, which should be part of your decision-making process.


The Bottom Line

A good bank is one that:

-Has low fees

-Offers good customer service

-Has a good reputation

Your money is easily accessible with this.

Does not charge excessive fees

Has a good interest rate for your savings

The bank has great online and app-based banking services.

Excellent customer service is provided.

Can be trusted with your money

Remember, you can always change your mind later or open a second account if your first choice is not optimal for you.

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