How To Find the Best Bank For You

Blog | August 23rd, 2019

Finding the right bank is tough. With so many choices, the prospect of trusting a new financial institution with your money may seem a little daunting. Since the type of bank you choose depends on your financial goals, it is essential to understand what you want from a bank.

Take a drive into town, and you’ll see that there is a bank on almost every street corner. Credit unions, national banks, and small, local banks are likely all present where you live. But which one is best? We’ll guide you through your choice, below.

Types of Banks

Everyone is familiar with Wells Fargo or Bank of America, but there are also smaller banks that exclusively service a regional, or even local, area. Credit Unions also function as banks but are not-for-profit. Let’s take a closer look at the differences between each.

National Banks

One of the most important aspects of having an account with a large, national bank like Citibank is convenience. You’ll never have to worry about locating a branch or ATM with these banks because they are pretty much everywhere.

You can get loans, mortgages, savings accounts, lines of credit, and even life insurance through national banks. These banks also have efficient online service, allowing you to do all your banking through your phone.

Like any large entity, customer service can leave much to be desired. Bank tellers will likely not remember your name when you go to a branch. Also, you aren’t going to earn much in the way of interest with your deposits. But if you’re looking for straightforward, no-fuss banking, then national banks are your best bet.

Local Banks

Your neighborhood bank might be a good option for you if you want to have a closer relationship with your bank. Typically, these banks will not have many branches. Therefore, customer service is a priority as these banks know they have to set themselves apart from the large banks to survive.

Although local banks are often not much more than one or two branches, the FDIC still insures them. The FDIC is a federal entity that protects all individual bank accounts up to $250,000. Thus, if you have money in a local bank, and it goes under, you won’t lose all your money.

Credit Unions

As mentioned above, credit unions are not-for-profit corporations. Credit unions exist to serve their local community, and will usually offer competitive rates on loans of all kinds. As well, credit unions pay out dividends to all their members, dispersing any profit amongst all their customers.

If you are looking for personalized attention from your bank, then a credit union might be your answer. They also offer a full range of services but suffer from drawbacks comparable to small banks. With few branches and limited ATM service, banking away from your local area could be problematic.

Banking is also increasingly digital. While credit unions offer excellent for customer service, they often lack a convenient digital presence. If you think you will do most of your banking online as opposed to in-person, then a credit union may not work for you.

Brokerage Firm

While not technically a bank, a brokerage firm offers financial products to those who want to invest their money. Stocks, mutual funds, bonds, index funds, and many other types of investments are on offer from a broker. Charles Schwab, Fidelity, and E-Trade are examples of some of the larger brokerage firms.

A brokerage firm is a middle-man. They make money when you use them to buy stocks or any other investment. Large brokerage firms offer multiple packages to all types of investors, big and small. You do not necessarily need thousands of dollars to invest with a brokerage firm, particularly digitally-focused firms such as E-Trade.

Related: Pros & Cons to Joint vs. Separate Bank Accounts

Bank Fees

When choosing between banks, one of the most important aspects to consider is the fees. Both banks and credit unions charge fees for their services. Credit unions will usually return those fees, to some extent, via dividends. All banking institutions require fees to make money. The most common fees include:
  • Checking account fee – the average checking account fee is $10/month, but many banks will waive this fee if you maintain a predetermined minimum balance.
  • Overdraft charge – banks currently charge around $35 if you withdraw more money than you have.
  • Minimum balance charge – typically no less than $500, keeping a minimum balance will help you avoid overdraft and checking account fees.
  • ATM fees – if you withdraw money from an ATM that does not recognize your bank, then expect to pay anywhere from $3 to $6 per withdrawal.
  • Foreign transaction fees – expect to pay around 3% on top of purchases you make out of the country with your debit card.

Banks claim to offer low fees, and many offer free checking accounts. Other fees may or may not apply to your financial situation, so be sure to consider which fees are relevant to your usage.

Determine Your Financial Goals

Establishing a purpose for your money is imperative before choosing a bank. If you are starting out and need a bank for direct deposit purposes, then a large national bank should suffice.

On the other hand, if you are more established and have a large chunk of money, then a brokerage firm might be more viable. A broker will be more knowledgeable and have more options for investing your money than a regular bank or credit union.

If you don’t like the notion of a large bank and don’t have a sum of money to invest, then a credit union is a good option. Personal and cost-effective, you can open an account at a credit union for a low rate. You may even get a dividend at the end of the year.

While most banks, brokers, and credit unions are relatively safe, making the right choice can save you money over time. Understanding what type of transactions you’ll be making will help you choose which type of financial institution works best for you.