Choosing a bank is one important step everyone should take on their road to handling their personal finances well. Not all banks charge the same fees, or have the same interest rates, or even offer the same types of accounts. Just because your sister or your spouse loves a bank doesn’t mean it’s a great fit for you. It’s also important to reassess who you bank with from time to time. Just because your bank was once a great fit doesn’t mean it’s still the right bank for your current needs and financial goals. How do you choose a bank that fits with your finances and your lifestyle? These tips will help everyone from personal finance novices to experienced investors find the bank that best fits their needs.
What Type of Bank Accounts Do You Need?
Every bank doesn’t necessarily offer the same sorts of accounts. Actually, what accounts people need differ as well. So the first step is deciding what accounts you need and finding a bank that offers them!
- Checking Account: For most people, this is the account that gets the most use. Via their debit card, physical checks, and online bill pay checking accounts are how a lot of people choose to pay their bills and daily expenses. Not all online banks offer physical check writing anymore, so watch out if you have a landlord or regular bill that requires a physical check to pay.
- Savings Account: Typically, savings accounts have limits as to how many withdrawals can be made each month. Most people use a savings account to store money earmarked for short-term savings goals (like a vacation or down payment). Retirement and other long-term savings are better off in other types of accounts.
- Certificates of Deposit: Also known as CDs, this savings vehicle offers higher interest rates, but commits the money for up to five years. Not a good idea for emergency funds and other money that might need to be accessed quickly.
- Money Market Accounts: Typically, these offer more withdrawals than a typical savings account. Some even offer check-writing and debit cards and can be used more or less as a checking account. Money Market Accounts often have higher minimum balance requirements.
Once you know what accounts you are interested in, you can start looking for banks that offer them. Some banks are full service and offer mortgages, investment accounts, and credit cards along with more traditional bank accounts. Some people choose to have accounts with a variety of banks. For example, they choose to have a neighborhood bank to handle cash deposits but also have an account with an online bank.
Are There Branch Locations Near You?
Even in a very digital age, most people like to have a bank branch near them for the times they need to meet with their banker. Mobile apps and online banking have made it possible for most transactions to take place away from the bank, but a recent study stated 78% of all new accounts were opened in person at a bank branch. It might also be important to you to have branded bank ATMs available to you if that’s how you choose to withdraw cash. Older customers and those who regularly take in cash, such as restaurant servers, especially value having a bank branch close at hand.
Fees and Rates
Banking fees can quickly add up and become a budget buster. One reason people like online banks is because they usually have very low fees and even offer free ATM usage of other banks’ machines. When shopping for an account, look at the monthly maintenance fee, any ATM fees, and what the bank charges in overdraft fees. According to Bankrate, the average overdraft fee charged by banks is now $33.47. Even banks that offer overdraft protection programs charge big fees. Look for a bank with low overdraft fees, especially if your bank account dwindles before payday. Same for monthly fees! Most banks offer free checking and savings accounts if you maintain a minimum balance. If you can’t do this, look for an account that offers no strings attached free checking or free checking if you have your paycheck direct deposited.
It’s important to know how a bank operates before you trust them with your hard-earned money. The best way to do this? Dig deep into reviews. Google, Yelp, Facebook, and other platforms offer customers a plethora of ways to make their voice heard when it comes to their experiences with any company. Granted, all institutions are going to have some bad reviews. No company, no matter how well-meaning, can make everyone happy. But as you read reviews look for patterns and look for issues that will bother you. So one rude branch manager in a city you don’t live in isn’t a concern, but multiple complaints over an extended period of time about the app crashing or online banking not working is something that might be a concern for you. It’s also a good idea to google the bank’s (or credit union’s) name with the term lawsuit to see if there are any ongoing class action suits you should be aware of.
Find a Bank that Fits Your Lifestyle and Needs
Banks offer a variety of experiences. A local bank that only has a few branches in your region, a bank that only operates online, a nonprofit credit union, or a financial services company with a great app can all offer ways to handle your finances. However, they prioritize different things and each has its own strengths and weaknesses. It’s important to find a bank whose strengths meet your most important needs.
- National Banks: These are brand name banks whose names and logos we all know and recognize. They offer a wide variety of account types, loans, and other services. Usually, they have a good online banking portal and a strong app. Bank branches are located around the country, making it easy to find one. The drawbacks? They typically charge high overdraft fees, charge monthly fees on checking accounts if you don’t keep a minimum balance in your account, and offer very low-interest rates on saving accounts.
- Regional and Community Banks: Smaller than national banks, these institutions focus on specific parts of the country, or even just their own particular region. They prioritize building relationships with their clients. Many of them are community development financial institutions, or CDFIs, which focus on serving low-income areas. Most credit unions fall under the umbrella of a regional or community bank. One drawback? They might not have the latest app or website available to customers who prefer online banking.
- Credit Unions: Credit unions are nonprofits that typically offer higher interest rates on bank accounts. All have membership requirements, ranging from living in a certain location to holding a job with a certain company or even just making a donation to a nonprofit. Like other smaller banks, they typically don’t have the most up-to-date apps or websites.
- Online Banks: Internet-only banks typically offer higher interest rates on savings accounts, CDs, and other saving vehicles. They also don’t usually charge monthly fees for checking accounts. Typically, they have great apps and modern websites. The drawback is not having bank branches or ATMs where you can deposit cash. Some don’t offer things like wire transfers or cashier’s checks, either, and that can be an issue if you buying a house or undertaking some other significant financial transaction.
- Neobanks: Neobanks are the newest type of bank and the caveat is, they aren’t actually a bank. A financial technology company typically partners with a banking institution to offer mobile banking accounts backed by federal deposit insurance. Most of these banks start by offering checking accounts. Some now also offer credit cards for those building their credit and some other types of loans. They don’t have branches, and again, usually don’t offer services like cashier’s checks or wire transfers. However, they do offer other things like faster access to direct deposits.
Traditional lending institutions, like banks, may have loan stipulations that might make it difficult for applicants to get approved. If you are concerned that you may not be approved for an urgently needed loan, an alternative lender may be worth exploring. TitleMax offers several alternative loan solutions, including car title loans and pawns and personal loans.
The most basic and important things everyone needs to know? Where their money actually goes. Most budgets fail because people vastly underestimate how much they spend on variable expenses like gas, dining out, streaming services, groceries, clothing, entertainment, and, for parents, kid-related expenses. So before you even think about budgeting (and you should, just not yet) spend a month or so just observing your spending patterns. Regular expenses that occur every few months or even yearly (like buying flea medication for pets or paying for car registration each year) are often forgotten and can upend a carefully planned budget (if this happens and you don’t have the savings to cover it, you can always get a loan to help bridge the gap). One easy way to do this is to try to only use one debit or credit card for the majority of your spending, so all the data is in one account. Many banks and credit card companies have the capability of categorizing your spending, so you can see pie charts and graphs on how much you spend on eating out, transportation, and other categories. There are also apps that track your spending. Mint is a perennial favorite among personal finance bloggers and podcasters. It’s free, powerful, and allows you to track your spending across various banks and credit cards all in one place!