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How to choose a bank
6 factors to consider when choosing a bank
1. Types of accounts you want to open
Any bank will offer its version of a checking and savings account, but you might be looking for more out of a bank. Do you need an account for your children? One for your retirement? Do you prefer the higher interest rates and check-writing capabilities of a money market account over that of a regular checking account?
You’ll also want to consider other services the bank offers. For example, credit cards and home loans. It could be easier to handle all your finances when they’re with the same financial institution. Once you know what you want, you can quickly eliminate any banks that don’t offer the financial products you’re looking for.
Where to find: Most large banks offer many types of financial services and products. Start by looking at the Big Four banks — Bank of America, Chase, Citibank and Wells Fargo. You can also narrow your search by searching for the best banks and credit unions to see what they each offer.
2. Interest rates
Paying a competitive interest rate is a huge selling point for banks these days. But some are still only paying interest rates well below the national average of 0.06% APY for savings and 0.03% APY for interest-bearing checking accounts.
Where to find: If you’re eager to earn the highest yield, consider an online bank. They save lots of money operating solely online and often return those savings to you through higher interest rates.
3. Online vs. in-person banking
Everyone banks differently — some never want to step foot in a bank, while others can’t imagine banking any other way. While most traditional banks offer the ability to bank online and through a mobile app, those who favor an intuitive digital banking experience will likely be best suited with a digital bank.
Where to find: It depends on what type of banking experience you’re looking for. If you prefer in-person banking, look at banks with a large national presence and ATM network. If you’d rather keep your banking fully online, look at digital banks. But if you prefer a mix of both, look at online banks. Online banks may not have a large physical presence, but depending on where you live, you may find a few branches near you.
Banks make a tremendous amount of money each year in overdraft fees — $11 billion in 2019, to be exact. Although it’s best to avoid overdrafting your account, things happen. Aside from overdraft fees, look out to see if the accounts come with monthly maintenance fees. If they do, check to see if they’re easy to avoid.
Where to find: You’ll find most online and digital banks to be the most progressive in this area. You can also narrow your search by first looking for free checking accounts. Once you find a free account you like, you can then take a look at the bank itself to see if it meets your other banking needs.
5. Customer reviews
Customer reviews are a good way to get a general feel for a bank. Of course, reviews can be exaggerated and subjective. But if most people are leaving positive reviews, you can probably assume the bank is doing something right. The same can be said about overwhelmingly negative reviews.
Where to find: Look at product and bank review articles online. You can also check the Better Business Bureau and Trustpilot to get an idea of how quickly they resolve and respond back to comments. You may also find reviews on forums like Reddit.
6. New account bonuses
Many banks turn to new account bonuses as a way to attract new customers. You won’t be hard pressed to find a bank offering a new account bonus somewhere between $150 to $300. Both online and traditional banks offer these every now and again, so it’s worth considering when shopping around. But you’ll also want to make sure that underneath the bonus, the account is still worth it. Because after the bonus expires, you’ll be stuck with the account.
Where to find: Once you’ve narrowed your search, check the financial institution’s website to see if there are any current offers. You could also try contacting the bank’s customer service and asking if there are currently any active signup offers.
5 types of financial institutions
Banks come in all shapes and sizes, so it’s best to familiarize yourself with the different types of financial institutions to choose from.
|Type of institution||Features||Drawbacks||Popular banks|
|Traditional large bank|
Whether online or in person, banking is personal and depends on what your financial goals and banking needs are. The best thing you can do is compare bank accounts so you know you’re choosing the right bank to meet your needs.
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