Personal Finance

How To Choose A Bank

Choosing a bank is one of the most important financial decisions anyone gets to make. Unfortunately, it is also one of the hardest.

Its importance hinges on the fact that your chosen financial institution could determine your financial health for the rest of your life. For instance, many banks offer personal loans which could help you meet your financial goals. Some others also help you maintain disciple by providing budgeting tools. In fact, the nature of the financial services your bank offers to you could affect your credit score. Hence, when you choose the wrong bank or credit union, you could be saddled with a liability potentially for life.

However, settling for the right financial institutions is difficult because of the different factors that are involved. For instance, at the moment, traditional banks compete with online banks. On the other hand, online banks compete with credit unions.  Similarly, there are many account types to consider, from checking accounts to savings accounts and even deposit accounts. There are other considerations, such as whether the bank offers interest and what the interest rates are. Ticking off all of these boxes can be pretty confusing.

Choosing A Bank

This article shows you what to consider when it comes to how to choose a bank.  You must understand that you should always prioritize financial protection when settling for any option. Most banks offer some incentive to customers. Hence, make sure you fully consider all the offers from each bank before you settle for any. Also, before you choose a bank, consider your long-term goals. It is possible to change your bank or credit union, for that matter, as often as you wish. However, it is usually better to find one bank and stick to it for a long time.

With these preliminary considerations out of the way, let’s dive into this complete step-by-step guide so you can learn how to choose a bank.

How to Choose a Bank

Different banks offer different unique banking services. To choose the best bank, you need to decide what to prioritize. Below are the factors you may want to pay attention to.

Finding The Right Bank

Type of Account

The type of bank account you wish to operate should inform the bank that you go for. It is possible to have bank accounts in multiple banks. However, it is helpful to bear in mind that having accounts with multiple institutions could invariably mean that you pay more fees. You should rather have all your accounts with one bank. A large national bank will be superb for this purpose. In any case, these are the popular bank account types there are:

Savings Account

This account category is perfect for those looking to stash money for a long time. A savings account is ideal for saving for an emergency fund, buying a home, or saving for a trip. Saving accounts typically attract interest. Thus, if you want to run a savings account, you may want to check the interest rates of the banks you are considering.

Money Market Accounts

A money market account is similar to a savings account. The difference is that it is usually easier to withdraw funds in this type of account.

Checking Account

A checking account is a primary account you use for regular expenses. Thus, you get to withdraw regularly from checking accounts. When choosing a bank to operate your checking accounts, pay attention to the fees they charge. A traditional bank will charge ATM fees and other monthly maintenance fees for using checking accounts.

Deposit Accounts

Deposit accounts are for holding funds for a specific period. Here, you lock up your money for a while, say two years. You get a fixed interest rate within the period. You can request your funds before the maturity date. However, the bank will charge some fees for this default. The amount will depend on the particular bank in question.


Another important consideration is the fees charged by the financial institution you are considering. Using this criterion, banks typically fall into three categories. The first category does not charge anything to your account. The second category charges fees you can waive if you meet certain thresholds. For instance, some banks waive fees for you if you maintain a specific minimum balance requirement within a given period. Then the last category has fees that can’t be waived. Most banks charge monthly service fees of varying amounts. Some of the fees banks charge include:

Bank Fees

ATM Fees

You may have to pay for using a bank’s ATM. Traditional banks only charge ATM fees after several withdrawals. However, you may want to confirm if the bank you choose reimburses you if you get charged by an out-of-network ATM.

Overdraft Fees

It is easier to prepare to make overdraft payments than to worry about overdrawing your checking account. This is because regardless of your best efforts, you could still overdraw. So, rather set up overdraft protection instead. In addition, most banks charge lower fees when you have overdraft protection in place.

Monthly Maintenance Fees

Some banks charge a monthly fee for maintaining your account. You may want to compare what different banks charge before committing to any.

Foreign Transaction Fees

You should keep your eye on this if you travel abroad regularly. The bank will most likely charge you for using your debit cards abroad. Thus, you should confirm how much the first are and whether you can foot them.

Finally, you may also want to pay attention to the interest rates the bank pays. A checking account typically will not pay interests. However, saving accounts and money market accounts do. 

For all of the situations above, the focus should be on taking advantage of banks that charge lower fees than the average. However, this is after considering different other factors.

Digital Features

A lot of financial institutions are turning to online and mobile banking. Hence, most banks will give you the room to carry out activities such as paying bills, transferring funds, and checking deposits when you use their online banking options.

The above services are what average bank customers require. However, if you are digitally inclined, then you should also check out other features, such as the ability to block your debit card. However, before you choose a bank, the digital features the bank offers, including online banking options, are quite important.

Online Banking

Physical Branches or Online Banking

Another important aspect of choosing a bank includes whether you’d use a traditional bank or an online bank. The advantage of physical branches is that you can easily walk in to deposit money or speak to a customer care personnel. If you go for this option, you should find a local branch that is close to you.

On the other hand, some banks operate entirely online. An online bank, like that of Chime Bank, offers the same services as a brick-and-mortar bank. However, online banks usually offer better interest rates and charge lower fees. You may want to be sure that they have FDIC or NCUA insurance.


Whether you use a brick-and-mortar bank or an online bank, accessibility is a huge consideration to have. If you have a deposit account or a savings account with any bank, you may not have any problems beyond how to do your direct deposits. However, for banks that you operate checking accounts with, you have to be sure there are ATMs available near you. If you use online banks, you also need to consider the ATM options they offer. There should be ones you can use easily and for free.

Another aspect of accessibility that could affect your banking experience is customer support. It might be impossible to avoid a situation where you have to talk to your bank’s customer care representative. Issues relating to late payment fees might crop up. Hence, do make sure that your bank offers support in this way. It might also be helpful to find out if they offer online-only services or if you could walk into a branch of the bank to make some complaints.

Read the Fine Print

You’d be surprised at the number of people who walked right into messy situations because they neglected getting familiar with the terms and conditions their banks offer. Do take your time to read the terms and agreements of your bank. Some of the things to consider include the fees they charge. As mentioned earlier, your best bet would be a bank that does not charge any fees. However, those are few and far between. You may also want to check out if the bank gives refunds for transactions that did not go right.

However,  a major factor to consider is if the bank or credit union is insured. This is to avoid running into losses if the bank closes down or something else happens. Banks are insured by the Federal Deposit Insurance Corporation (FDIU), while credit unions are insured by the National Credit Union Administration (NCUA). Even online banks should be FDIU-protected too. You can easily confirm if the bank or credit union is insured by visiting their website. Lack of insurance is a risk you should not take. Hence, if you discover a bank lacks insurance coverage, you should immediately pull back.

Read Reviews

Reading reviews is a sure way to get correct information about anything. Unbiased reviews from independent customers and clients will inform you of the true state of affairs. For instance, if you really want to know how direct deposit works with any bank or if you get charged for using out-of-network ATMs, current customers are your best bet. The bank might exaggerate, over-promise, or outrightly lie about its offers. However, you can wholly trust other customers like you.

Ideally, you should consider reading reviews after you have shortlisted some banks or credit unions. This is to say that reviews should be one of the last things you should do. Furthermore, you can easily find reviews online. There are online forums that discuss different banks.

Read Bank Reviews

Consider Credit Unions

Eventually, it could come down to choosing between banks and credit unions. A credit union has some advantages over a traditional bank.

Credit unions are not-for-profit organizations. Credit unions tend to be member-owned. This means that profits are eventually returned to customers. This is not done directly. Most credit unions return profits to their members through lower fees and high-interest rates.

Furthermore, credit unions often maintain life-long relationships with their members. Thus, it is common to find local credit unions acting the same way community banks operate. Thus, if you are looking for a financial institution that will feel like family, then a credit union might be your best bet.

However, you should know that it is not so straightforward to access the services credit unions offer. Also, online banking may be unavailable. If you have no problems with this trade-off, though, then please go ahead with a credit union.

Kevin Martin

Kevin is an ambitious entrepreneur that is obsessed with all things related to finance. From a young age, Kevin has always been involved with side hustles ranging from online selling to freelance work. Over the years, Kevin graduated from side hustles and started launching multiple online and offline businesses. Kevin is a serial entrepreneur who loves starting new businesses and exploring all things related to business and finance. He is constantly looking for new ways to save money, invest money, and create income streams.