Ultimate Guide to Choosing a Bank

The best bank varies per person, based on individual financial needs and situations. With many types of banks and accounts, finding one that aligns with your circumstances and goals is important. Banks also offer different levels of services and fees. Comparing the different features — security, fees, interest rates and special offers — can help you find the best option, maximize the benefits and positively impact your financial management.

To choose the right bank for you, it’s essential you understand the different banking institutions, account types and ways to protect against potential bank collapse. This knowledge can help you make well-informed decisions to achieve financial success.

Banking can be crucial to financial management. Depending on your goal, you can use it to create a financial safety net for unexpected incidents or build wealth. That’s why it’s essential to consider various factors carefully.

Before evaluating other aspects, ensure you understand the basic types of bank accounts. This can assist you in narrowing down your options.

A checking account is often linked to a debit card that you can use when making purchases or ATM withdrawals. This account also allows you to write checks, pay bills, transfer money and deposit cash or checks.

A savings account is among the most common and first bank account people open. They typically earn interest and are great for short-term saving. Keep in mind that your bank may impose a withdrawal limit per month.

A certificate of deposit (CD) is a banking account where you can keep your money for a certain period. Your money earns interest while it’s stored in the account. Although you can access your money before the account’s maturity, your bank will likely charge fees or impose penalties.

Money market accounts are like a combination of checking and savings accounts. These accounts allow you to have a debit or ATM card, earn interest and write checks. However, there may be a transaction limit and minimum balance requirement.

Banking institutions offer different products. Choosing between them can be a bit overwhelming. A good place to start is by reviewing your financial situation and goals. Then determine which account will help you achieve them.

Given that each type of account has different purposes, it’s okay to maintain multiple accounts simultaneously. You can split your money into different bank accounts as part of your financial management plan. This means you can build an emergency fund while preparing for retirement and creating an investment plan.

The next step you should take is to choose a banking institution. Each bank has its products, features and services. There’s not typically a one-size-fits-all option. Comparing strengths, shortcomings and priorities can help ensure you get the service provider that will cater to your financial needs.

Banks are built differently and come in different structures. The most common institutions for personal banking are traditional banks, credit unions, online banks and community banks.

A traditional bank is what typically comes to mind when discussing banking institutions. It has physical locations known as bank branches, but online services may also be available depending on the bank.

Credit unions offer similar financial products and services as traditional banks, including deposits, credit cards and loans. They refer to nonprofit financial institutions that members of unions own.

As the name suggests, an online bank operates online and doesn’t have brick-and-mortar branch locations. These banks typically offer better rates than traditional banks.

Community banks usually have the same products and services as traditional banks. The only difference is a community bank offers them in a smaller geographic area.

Bank fees can greatly impact your finances over time. Banks typically charge transaction fees but they may also impose different fees on individuals. You can avoid these charges by choosing a bank that offers low or no fees. You can commonly find this feature in online banks, but traditional banks and credit unions may also waive fees for certain offers.

Banks offer a wide variety of features and services. However, it may be challenging to find a financial institution that has all the best features. Identifying which features are essential to suit your financial needs can help you choose a bank. You can start by listing down the features and services you consider non-negotiables or those you can’t do without.

Annual percentage yield (APY) refers to the interest rate usually applied to money you invest into deposit accounts, including CDs, money market and regular savings accounts. It shows how much you may earn from the investment. The higher the APY, the more significant your gains. Online banks and credit unions often offer more competitive rates than traditional banks.

Although most banking institutions provide ATM services and access to national ATM networks, some may impose transaction fees if you use an out-of-network ATM.

If you want a financial institution with physical branch locations, traditional banks, credit unions and community banks are great options. Among these, traditional national banks have more extensive networks. Meanwhile, many credit unions are part of the Co-op Shared Branch network. If your credit union is one of them, you can do your transactions at another participating credit union.

Most banks are insured by the Federal Deposit Insurance Corporation (FDIC), while credit unions are under the National Credit Union Administration (NCUA). This guarantees that a person will get up to $250,000 should their financial institution go bankrupt.

Debit and credit cards under the Visa and Mastercard networks also tend to have fraud protections.

Most banks, primarily national and online, offer digital features like mobile apps you can easily download from the App store or Google Play. These allow you to do transactions wherever you are.

You may find special offers, such as cash back and budgeting tools, in some banks and credit unions. These are usually available through certain products. For instance, cash back may be accessed through credit card transactions. Budgeting tools may be available through digital platforms.

If you’re interested in other services, such as loans and investments, you may consider banks and credit unions with branch locations. Remember that there may be requirements you need to meet to qualify for certain services.

Once you narrow down your list based on which types of accounts and banking institutions align with your financial needs and goals, your next step is to choose the right bank. Find the one that has the essential features you find important. Compare fees and rates. It would also help to review the terms and conditions.

Reading about bank failures may cause some people to think twice about banking. For instance, the recent back-to-back failures involving the Silicon Valley Bank (SVB), Signature Bank and First Republic Bank have impacted the industry.

The SVB collapsed after depositors rushed to withdraw funds because of insolvency concerns. Signature Bank clients followed suit and withdrew funds en masse upon the SVB collapse. Similarly, First Republic couldn’t recover from losses as its assets dropped after huge depositors decided to withdraw funds over the federally insured limits.

This isn’t the first time the country witnessed bank collapses. However, this doesn’t mean using banking institutions is no longer safe. Taking preventive measures can help protect your hard-earned money.

Various resources and tools exist that you can use to understand bank accounts and banking institutions. MoneyGeek created a list of resources you may find helpful as you embark on your banking journey.

• Consumer.gov: Learn more about budgeting, important details you need to know and how to start a budget for better money management.
• FDIC BankFind Suite: Look for a bank institution, locate branches and determine whether it’s FDIC-insured.
• Federal Trade Commission Consumer Advice: Know the signs to look for to spot fake check scams and understand how these scams work.
• Financial Independence 101: Use this free online training course to start your journey toward financial independence.
• Investor.gov: Access free financial planning tools and learn about investing.
• MyCreditUnion.gov: Access various insurance toolkits for consumers. Find a credit union near you.
• National Association of Personal Financial Advisors: Search for fee-only fiduciary financial planners using your ZIP code or location.
• USA.gov: Learn about different scams and fraudulent activities. Find out where you can report a suspected scam.
• SMART Goals Tool: Use this resource material from the Consumer Financial Protection Bureau (CFPB) to determine the values most motivating to you and set your goals.
• Spending Tracker: Download this tracker to monitor your weekly and monthly expenses.