Intro: How to Choose a Bank | Guide on Choosing the Right Bank for You

We’ve all been there: It’s a new season in our life, our old bank just isn’t cutting it anymore, and we need to figure out how to choose a bank that meets all of our needs.

Choosing a bank can be a chore when you have to wade through all of the programs, options, fees, and perks of opening a new account at each location. In 2016, figuring out how to choose a bank has become even more difficult with the surge in popularity of online banks.

So, how do you decide what bank to choose?

how to choose a bank

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We’re going to walk through some of the basic advantages and disadvantages that you should keep an eye out for regarding each of your potential financial institutions. When we’re finished, choosing a bank should be another chore on your list that you can cross off quickly.

Make Sure the Bank Is Legitimate

Before we can even begin to examine any of the other important aspects of which bank to choose, you need to ensure that every option is legitimate. You will want your account to be covered by insurance that protects your account up to the amount of $250,000. In the event that the bank fails, your money is protected by the Federal Deposit Insurance Corporation (FDIC).

While most large banks and nationally recognized banks should be backed by the Federal Deposit Insurance Corporation (FDIC), you will want to double-check. If you’re considering a smaller bank or more local option, be sure to do your homework first. If you’re most interested in an online-only bank, be sure to verify its insurance directly with the FDIC. The first step in how to choose a bank is to always make sure your money is protected.

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Location, Location, Location

If you take a drive through the major city nearest you, you’re bound to see a multitude of options that can make you begin to wonder, “Which bank should I choose?” The old adage often heard in real estate, “location, location, location,” applies when you’re considering how to choose a bank as well.

You want to have convenient access to your funds when you need them without arranging a special trip to the next town over. You will want convenient access to ATMs and drive-up services to make the most of your accounts.

Additionally, you have to consider whether you spend a lot of time travelling. If you spend the majority of your time in your hometown, a small local bank may be a good option for you. However, if you take frequent vacations or business trips, you need to be sure to choose the right bank. This would be a bank that has branches all over the country or, at the very least, in the parts you frequent most.

Find the Fees

Opening a new account at a brand-new institution should be viewed as making a wise investment with your resources. You don’t want to squander hard-earned money on unnecessary or avoidable fees associated with maintaining a checking or savings account. The American Bankers Association recently discovered that as much as 45 percent of Americans pay a monthly maintenance fee on their checking account, a cost that is completely avoidable at most banks.

Choose an account that is either free or has fees that can be waived under certain circumstances. For example, many banks will forego fees if you register for direct deposit, keep a minimum balance or opt for paperless statements. Bankrate’s research uncovered that 96 percent of checking accounts at traditional banks would be categorized by one of those two features. Be sure to choose an account that does not fall into the remaining four percent.

Forbes gives a list of attributes you should be on the lookout for when it comes time to choose an account for checking:

  • No monthly fees
  • No required minimum balance
  • No limit on the number of transactions
  • Free ATM access

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Overdraft Fees

Deciding what bank to choose wouldn’t be complete without examining overdraft fees. It happens to the best of us. Sometimes, we forget how much money is left in our checking account and overdraw from the account. If this is something that is more of a regular occurrence for you, you definitely want to examine the overdraft fees when choosing a bank. Some banks may charge $30 or more plus interest on the amount of money you overdraw.

You don’t want to let those fees add up. Many banks will offer overdraft protection by pulling the overdrawn amount out of your savings automatically. Others may give you a grace period to add the additional funds necessary into your primary checking account. If you are particularly prone to living paycheck to paycheck and overestimating the balance of your account, find out what the overdraft protection programs would look like or cost. Choose the right bank for your needs by researching the various programs available at each one.

Save Your Money

Once you’re well into the process of figuring out how to choose the right bank, you’ll want to start examining the savings account options as well. The best savings accounts don’t allow your money to just sit stagnant within the bank’s safekeeping but instead give you the opportunity to accrue interest. When it comes to savings accounts, you’ll want to search for an interest-bearing option that gives you the best possible rate.

According to Nerd Wallet, the national average rate is approximately 0.06 percent, but online savings accounts can reach even higher than one percent. Online banks are able to pass along more savings to their customers because they are saving on the overhead of maintaining brick-and-mortar locations. If having a physical location isn’t on your list of must-haves for choosing a bank, an online-only option might be a good choice to help you get more out of your money.

Also, if a savings account alone doesn’t offer the interest you would expect, consider choosing a bank that also offers a flexible money market account. The interest rates are generally higher than a traditional savings account, but they will also have higher minimum balances. Money market accounts are designed for your money to grow while you sit back and watch. These types of accounts are significantly better for individuals who do not need access to these funds on a regular basis.

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Is Online the Right Option?

Are you a people person or do you go out of your way to avoid face-to-face interactions? The biggest disadvantage of an online bank is the lack of access to real people in a tangible location. While online banks do offer customer service support through phone calls and live chats, it still isn’t quite the same as a sit-down meeting with a representative. When you’re trying to decide which bank to choose, online banks do offer a number of advantages.

Choosing a bank that is online gives greater flexibility in the hours and method you use to manage your money. You can bank anywhere, anytime with access to an online bank. Depositing checks and making transfers doesn’t have to happen solely during business hours. Alternatively, there are many larger banks that offer these features through their mobile or online apps as well.

The biggest drawback to an online bank is the lack of access to ATMs. Before you choose an account, be sure to inquire where the closest fee-free ATMs would be. Many times, they are only near or well within urban areas. If you frequently withdraw cash from the bank, you may rack up fees fairly quickly for ATM use.

TIME magazine recommends doing a little bit of research to find out how long it takes to reach an actual customer service representative on an online bank’s phone line. While many items may be able to be taken care of via an automated machine, one of the biggest things you can do to choose the right bank is make sure you have access to support when and where you need it most.

Financial Products

If you prefer to do all of your banking in one location, you’ll want to research what additional products are available before choosing a bank. Evaluate the bank’s options on things like car loans, mortgage loans, home equity lines of credit, retirement accounts or CDs. Compare its interest rates and terms with other banks in the area to see how it stacks up before deciding what bank to choose.

Take a good look at a bank’s credit card offerings as well. You’ll want to examine a number of things from this aspect, including its interest rates. If you typically carry a balance, you want to make sure that there is a reasonable interest rate with a low APR.

Rewards programs are also beneficial, as they can help your money to grow without any work on your part. Choose an account with a rewards card that gives you the type of rewards you would want to see: cashback, reduction of your credit card statement, travel points or the ability to shop through one of its stores or sponsors.

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Mix and Match

Don’t forget that you may find aspects of several different banks appealing. A larger institution might be better for your checking account because of the spread of its ATMs and physical locations while an online bank might be better-suited for your savings account. As long as you don’t mind having several institutions involved, it might be easier to choose the right bank for each item on your list. Nerd Wallet’s guide to how to choose a bank recommends mixing and matching the services available as best suits your needs.

Particularly when it comes to other financial products, other banks may compete for your business by offering lower interest rates or better terms on loans and mortgages. There’s nothing wrong with mixing it up as long as you can keep track of where your money is located.


Which bank should I choose? It’s a question that most of us have faced at some point in our lives.

Whether it’s time to make a switch from our current bank, we’re moving to a new area that forces our hand or we’re starting fresh, learning how to choose a bank and, more importantly, how to choose the right bank are important skills to have.

Especially in this day and age, when there are so many options available for choosing a bank, you need to arm yourself with the knowledge of what’s out there.

Evaluate each bank’s insurance, location, fees, additional products, and customer service to choose the right bank for your needs each and every time. Whether you choose to go with a well-known financial institution, a smaller local bank, a credit union or an online-only bank, feel confident knowing that you know how to choose a bank with wisdom and financial acumen.

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