Five Things to Consider When Choosing a Bank

Five Things to Consider When Choosing a Bank

Choosing a bank is a highly subjective decision, but everyone must consider five essential things before making a final decision.

At a minimum, your deposits should be backed by insurance. Also, it is important to assess fees, accessibility, types of accounts and services, and interest rates.

You will generally have to choose between traditional brick and mortar banks, credit unions, and online banks.

Verify the institution is backed by insurance

Most deposit accounts with reputable banks are backed by the Federal Deposit Insurance Corporation or FDIC. This government-backed insurance ensures your deposits of up to $250,000 are guaranteed if the bank goes under.

The $250,000 limit covers each account category, although some investment accounts may not be covered by FDIC. If the bank were to fail, FDIC insurance protects you against losing your funds.

  • When you open a checking or savings account with a non-FDIC-insured bank, you’re putting your money at risk.
  • If the bank dissolves, there is no guarantee you’ll get the money in your account back or be able to withdraw it.

Credit unions are backed by deposit insurance through the National Credit Union Association or NCUA. Online banks should also be insured through the FDIC. If you decide to open an account with either type of institution, verify that the one you go with is insured.

Look at the institution’s fees

Fees are where you’ll find some of the widest variances between financial institutions. For example, large, brick-and-mortar banks with branches across the nation may carry more fees.

Charges for ATM withdrawals and writing bad checks might also be higher than with a credit union or online bank.

For example, some checking accounts will come with fees for going over a certain number of ATM withdrawals each month.

Others will waive monthly maintenance fees if you use direct deposit or have more than one account type with the institution. So, for example, you might take out a mortgage, a savings account, and a checking account with the same bank to avoid the fee.

Be honest about your financial habits and compare those with the fee structure. For example, online banks tend to have lower fees since their operational costs aren’t as much as brick-and-mortar institutions. Some credit unions also tend to have lower fees.    

Think about accessibility

Are you the type of person who prefers to visit a bank in person to make deposits, payments, or withdrawals? If so, you’re probably going to want to choose a bank that has physical branch locations. Customers who travel or live bicoastal lifestyles will prefer a national branch.

While many traditional banks also have online and mobile app capabilities, sometimes it’s more convenient to access a physical branch and ATM network. Many traditional banks do not charge withdrawal fees for using their ATMs.

Having a more extensive local or national ATM network can provide more convenience.

In addition, you’ll gain the ability to make deposits at more locations if you’re uncomfortable using mobile deposit features.

Things to consider about credit unions:

  • Credit unions will usually have some physical branches, although they may be limited to one city or region.
  • You might also find that credit unions only have one brick-and-mortar location in a sizeable town.
  • This could lead to longer wait times and restrictions while going out of town.

On the other hand, online banks do not have any physical branches. Instead, they may have designated ATMs throughout the country you can use for no-fee withdrawals and deposits. But most of these banks are only accessible online or via phone.

If you’re comfortable with direct deposits, online bill pay, and making deposits through a mobile app, online banks can offer some of the same services as traditional banks.

Evaluate accounts and services

Some people don’t need any more from a bank than a basic checking and savings account. Others want CD and money market accounts, in addition to credit cards and the option to take out personal or home equity loans.

If you prefer to house all your financial accounts at a single bank, national, traditional institutions will be the better fit. First, however, it’s worth checking with local credit unions to see what range of products and services they offer.

Many credit unions have membership qualifications, so you’ll also want to double-check those. For example, some specify you must work for a local employer or maintain your primary residence within a specific radius.

If you’re looking for the basics, you’ll probably be able to open both a checking and savings account with online institutions. You might even find money market account and CD options.

Compare interest rates

For CDs and money market and savings accounts, you’ll want to compare interest rates. Some banks also offer interest checking accounts. Online banks and credit unions are more likely to offer higher interest rates on checking and savings accounts.

However, this isn’t a fast rule, so be sure that you’re getting the most for your money along with the features and benefits you need. You also have the choice of mixing and matching accounts.

For example, you can open a savings account with an online bank that offers higher interest rates. You can then keep your checking account with a traditional bank with the in-person features you need or want.

You’ll want to weigh the advantages of earning more interest versus the disadvantage of losing the convenience of housing all your accounts at one financial institution.


When choosing a bank, you’ll want to list your objectives, needs, and preferences.

Then, compare those against what different financial institutions can offer. In most areas, you’ll have your choice of traditional banks, credit unions, and online-only options.

Insurance, fees, accessibility, range of services, and interest rates should all play a role in your decision.  

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