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- 1 Types Banking Providers
- 2 Types Of Bank Accounts
- 3 Interest Rates & Fees
- 4 More Tips On Choosing A Bank
- 5 Bottom Line
When choosing a bank, you should think about things like rates, fees, and how easy it is to get your money.
One of the most important financial decisions you can make is where to put your money. Different banks offer very different levels of service, charge different fees, and give you different amounts of interest on your money.
As your financial and investment goals change over the course of your life, the best bank for you may also change. It’s a good idea to remember that you can have as many bank accounts as you want and can switch from one bank to another as often as you want.
In this guide, we’ll look at the most important things to consider when choosing a bank and type of account.
Types Banking Providers
There are three different kinds of financial institutions that provide banking services. Each has its own set of pros and cons.
Most people think of traditional banks when they think of a bank (e.g. Chase, Bank of America, Wells Fargo). These banks mostly serve their customers through a network of physical locations, and they offer ATMs to both their own customers and customers of other banks. They also let people pay bills and make deposits through online banking.
Even though these banks have been around the longest, there aren’t as many reasons to choose them over online banks or credit unions as there were in the past. Because both of these options have lower fees than traditional banks.
Still, you may want to go to your local branch and talk to someone about your question or problem. Because of this, you might want to go with a traditional bank.
Online Banks/Banking Services
In the past, there weren’t many online banks/banking providers (e.g. Aspiration, Axos, CIT Bank, Juno), but their popularity has grown over time, and now they compete directly with traditional banks. Because online banks have fewer or no physical branches, their overhead costs are much lower than those of traditional banks. This means that their fees are usually much lower as well.
Still, many people are frustrated by the customer service that online-only banks offer. Even though the best online banks now have a lot of customer service options, you still can’t walk into a branch and talk to a bank employee.
A lot of people know about the biggest banks, but credit unions are also worth looking into.
Credit unions are not-for-profit groups that are owned by their members. Profits are usually given back to members in the form of lower fees, higher interest rates on savings, and lower interest rates on loans.
Traditional banks that are owned by the public, on the other hand, have to meet revenue goals and answer to shareholders.
It’s not as hard to join a credit union as it used to be. Many of them are available nationwide, and you can join many of them just by joining an organization or making a donation to a charity.
Types Of Bank Accounts
There are many different products and services that banks offer. Matching the right types of accounts to your financial goals and priorities is a good place to start.
The most common accounts are:
- Checking accounts
- Savings accounts
- Money Market accounts
- CDs (Certificates of Deposits)
For your main checking account, you might want to go with a bigger, more traditional bank that offers more than one type of checking account. For a checking account with a high interest rate, many credit unions and online banks offer better rates. See some of the best checking options from big banks…
If you want the best return on your money, you might want to open a high-yield savings account. Most of the time, online banks pay higher rates than traditional banks. As long as they are insured by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Administration (NCUA) for credit unions, online banks are just as safe as other banks. See the best savings rates…
Money market accounts are another option. They are similar to savings accounts, but you may be able to write checks with them. Many banks also give out debit or ATM cards, which usually have a limit on how many times they can be used in a month. See the best money market rates…
CDs are another way to make money on your money. When you put money in a CD for a set amount of time, which could be anywhere from a few months to a few years, you are guaranteed a certain rate of return. You can get your money out of the CD before it matures, but you’ll probably have to pay fees or give up interest or even some of the principal. See the best CD rates…
Interest Rates & Fees
The fees and interest rates from a bank are the next thing to think about.
Types Of Fees
Most banks charge a fee each month to keep a checking account open, but these fees can be very different.
Typical types of fees include:
- Monthly maintenance fees (no-monthly fee checking options here)
- Statement fees
- Out-of-network ATM fees (get out-of-network ATM reimbursements with the TD Beyond Checking)
- Wire transfer fees
- Overdraft fees
- Stop payment fees
- Returned check fees
- Cashier’s check fees
- Certified check fees
There’s no reason to stay with a bank that charges fees that can be avoided when there are so many banks with low or no fees.
Many banks, including big ones like Citibank and Bank of America, are taking steps to get rid of or lower overdraft fees. Think about whether the banks you are comparing have caught on to this trend by making their overdraft rules more flexible.
Take these steps to avoid fees once you’ve found the best account for your needs:
- If you link your checking account to another account at the same bank, the bank will pull money from the other account to cover a transaction if your checking account goes overdrawn. This service may have a fee, but it’s usually less than an overdraft fee.
- Sign up for low balance alerts on the website or app of your bank or credit union. These alerts, which can come in the form of text messages, let you know when your account is close to being overdrawn.
- Find out if there is a monthly maintenance fee and how you can get out of paying it. Most of the time, banks will waive the fee if you have a minimum daily balance or set up direct deposits.
For the most part, savings accounts provide better interest rates than checking accounts.
You probably won’t need to get into your savings account as often as you do your checking account, so you probably won’t need an app or online banking services. Most savings accounts don’t have high fees as long as you don’t take money out of them often.
Credit unions and online banks often have the best rates. Find the best interest rate for your savings by shopping around.
More Tips On Choosing A Bank
Do You Need Bank Branch Visits?
Accessibility is another important thing to think about when it comes to banking.
Depending on what you’re used to, you might put different conveniences at the top of your list. People who do most of their tasks online may value digital banking resources more than being close to a branch. For people who are used to branch banking, this may not be the case.
Branches are still important to most consumers. A common reason people give for choosing their main financial institutions is that they have branch offices in convenient places.
Important Extra Features
Most banks also have a variety of other services and features that may be important to you.
Because everyone has different needs, take some time to think about how you use the accounts you already have. Some important things could be:
- Online banking and banking with apps. These options are now available at most banks. A full-featured online service can save you a lot of time if you use your account often. Not all banks have features that customers want more and more, like being able to lock a debit card or manage mobile banking alerts. Also, not all online banks have apps for smartphones, so you may have to use a mobile browser to sign in to your account.
- ATM network. Many people need a branch of their bank close by, at least for their checking account. In the same way, a network of ATMs might be important to you if you travel a lot and need easy access to cash while you’re away from home.
Know The Rules & Regulations
The account agreement usually has important information about a bank account. It may not be on the account’s home page, but it’s usually somewhere else on the bank’s website. You can make sure you don’t miss any hidden fees by reading the disclosure.
If there are monthly service fees, the account agreement will tell you how to get out of paying them. If you have to pay out-of-network ATM fees, the fee disclosure may tell you if the bank will give you a refund.
Make sure that the NCUA (credit unions) or the FDIC (banks) will cover your deposits (in case your bank shuts down).
Banks stay competitive by offering similar features. If you live in a major city, you probably have more than enough options to fit your needs. A deciding factor could be the sign-up incentive a bank provides. You can even open multiple accounts from different banks to maximize your incentives. See the best bank promotions here…
Not every bank has the same fees, interest rates, services, or even types of accounts, so it’s important to compare the things that matter to you.
Think about what each bank has to offer and how it would help you reach your goals and improve your life. Finding a bank that meets all of your needs and has lower fees will make it much easier to manage your money.
Qualities of a good bank include the following:
- Charges reasonable fees and gives you a good return on your savings
- Makes it easy for you to get to your money
- Has great services for banking online and through apps
- Provides excellent customer service
- Is honest about your money