How to Choose a Bank

Updated on March 5, 2024

According to a 2019 survey, about 95% of the U.S. households had a bank or a credit union account. Bank accounts are something most people need at one point, but opening one becomes difficult when you have no idea which bank would be best suited to hold your funds. So, how to choose a bank? Don’t worry, we’ll help you select the right option by offering some very useful tips, so read on.

Understanding the Types of Bank Accounts

An important consideration before you open your account is the type of bank account you want to open. Banks have a variety of account types that people can open, and each of them has something that sets it apart from the others. Instead of starting the bank choosing process by comparing different banks, you should first consider what type of account you need. This should be determined based on your financial goals.

For instance, if you want to replace your checking account, you may want to go to a big traditional bank. These banks usually have multiple types of checking accounts to pick from, so you’ll have enough options. Or you may want to settle for a high-yield checking account instead. These are usually offered by community banks or credit unions. Meanwhile, if you’re thinking of a money market account, you should look more carefully for a financial institution because not all banks are going to offer this type of account.

People who want to save some money should consider high-yield savings accounts. Back in 2019, the Federal Reserve has cut interest rates not one, but two times. Additionally, several banks have decreased their yields for savings accounts. It’s important to keep in mind that when it comes to savings accounts, online banks may still be offering competitive rates.

Just remember – if you know what type of bank account you want to open, it will help you choose a suitable bank that offers you what you need.

Understanding Different Bank Account Fees

Banks apply fees for several services, and knowing these fees could also help you choose your financial institution. Some banks have higher taxes than others and knowing which ones charge less while being able to offer you what you want will make the selection process much easier.

Usually, a bank will charge foreign transaction fees, ATM fees, and card replacement fees, so you need to find out how much these are before you open your account. It is possible to find credit unions or banks with free checking, in which case there will be no minimum balance charges to worry about or any monthly maintenance fees.

Just make sure you don’t let yourself be blinded by freebie offers. Read all about the fees from the very beginning. In some cases, banks will offer freebies, but only for a period, while you’re a new client. Later, you may risk being stuck with higher fees. You need to avoid this if you don’t want to pay atrocious amounts of money later.

Know the Interest Rates

Don’t overlook the importance of interest rates when making your choice. Basically, interest rates represent the interest you will earn in savings, checking, CDs, and money market accounts. It’s important to research this, even if the numbers are not big. You can easily find information about this online, and remove the ones with lower rates from your list of options. It’s more likely to discover better rates for online banks, as they don’t have the same costs as brick-and-mortar banks.

Also, keep in mind that there are many banks that have certain rates only at the beginning, which they use in order to attract customers. Over time, these rates can change. This is what makes it so important to read everything very carefully and not make a mistake when picking a bank.

Look at Digital Features

It may not seem that important at first, or you may not think about this right away, but digital features are of great importance too when it comes to choosing a bank. Basically, most banks offer certain services through their online or mobile channels. For instance, they may offer the option to pay bills, transfer money, make mobile check deposits, or check your balances. While these may seem normal in our time, not every bank offers these options.

Some banks miss one or more of these features, and the customers keep asking for them. These could include the option to manage mobile banking alerts, or lock debit cards in case strangers would ever try to use them. Sadly, not every bank has a banking app.

This is why you have to consider the digital features of a bank before you open an account with them. If you already have goals in mind when it comes to this aspect, then you can’t just go with a bank that doesn’t offer what you need. The experience would end up being unpleasant, and you’ll regret not going to a different bank from the get-go.

When you’re trying to choose a bank, always look at their digital feature options and see if they have everything you need. Never settle for less than what you want.

Understand the Terms and Conditions

It should go without saying, but you should never open a bank account without reading the fine print first. Before you become the owner of a bank account at any bank, you need to know the terms and conditions and understand them.

For instance, your savings have to be federally insured by the National Credit Union, or the Federal Deposit Insurance Corp in case the bank closes. Also, if there are any monthly service fees, you should find out if there’s the option to have them waived. If out-of-network ATM charges apply, discover if refunds are offered by the bank.

Moreover, you have to compare CD rates and other products as well. It’s important to see if there are any promotional deals that are about to expire. As mentioned earlier, there are these things known as teaser rates. They usually look appealing in the short-term, and you may be easily tempted to settle for something like this. But in the long-term, this will end up costing you money. If you go for something like this, you might regret your decision later, when it feels like you’re throwing money out the window.

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Conclusion

Choosing a bank can be a daunting task unless you know what this process involves. There are multiple things that need to be taken into account if you want to make the right decision. Indeed, different banks offer different benefits, but some will also have their drawbacks. This is why you should know what you want before opening an account with any bank.

If you consider the tips in this article, you will see that choosing a bank will be much easier than it seems. Make sure you know enough about the bank first and then decide if it can satisfy your needs.

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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