Most consumers approach banking the traditional way, i.e., they find a local bank, open an account – THEN FORGET ABOUT IT. They may stick with the same bank for years, regardless of the fees or their evolving financial needs. Although a local bank may be the best choice for you now, there may be other options to consider as your financial objectives change and you move into the future. Have you noticed high fees or other unexpected changes at your current banking institution? Maybe now is the time to switch banks.
There are nearly 7,000 FDIC-insured banking institutions in the U.S., and they come in various shapes and sizes. There are major banks, local banks, credit unions and a variety of online banking options. Although these banking institutions provide many of the same services, there are some circumstances where one bank may be better than another. Here are some factors to consider when choosing a bank:
Banking Around on Your Personal Needs
- Younger Consumers: Age plays a big role in choosing the appropriate financial institution. Students often have trouble qualifying for free checking accounts because they tend to carry lower balances and don’t receive regular paychecks to meet the direct deposit requirements. Luckily, many banks provide free checking to students with simplified terms. Local and regional banks are more likely to provide free student checking, but some larger banks offer it as well.
- Older Consumers: Many of the same banks that offer free checking to students, also provide free-checking to seniors or retirees. In some cases, the qualifying age is often as young as 50 years old, so be sure to shop around.
- Saver vs. Spender: If you plan on keeping large amounts of money in your account, then focus on finding the best savings or money market account, or highest CD rate. If, on the other hand, your primary need is checking, look for a bank which offers free checking. Free checking at traditional banks may have some strings attached (i.e., direct deposit and / or minimum balances), but many online checking accounts are completely free of monthly maintenance fees.
- If You’re Wealthy: Wealthy customers need to be careful about exceeding the $250,000 FDIC insurance limit. For your funds to be federally insured, the total of all your accounts at any one institution cannot exceed this limit; otherwise, anything above the limit won’t be protected. The wealthy often spread their accounts among multiple institutions to protect more assets. Each account should be chosen based upon it’s purpose, i.e., checking, saving, investment, etc.
- If Your Income is Limited: If you’re at the opposite end of the spectrum and live paycheck to paycheck while maintaining a minimal checking account balance, then many banks have minimum balance requirements to keep an account open, or to qualify for free checking. These balance requirements tend to be lower at smaller banks, and they are especially low at online banks.
- Frequent Travelers: If you travel frequently, look for a bank with the largest ATM network or with ATM’s in the areas that you travel most, so you can avoid ATM fees. These are not necessarily the banks ATM’s; some banks belong to broader networks or reimburse ATM fees. If you travel internationally, consider a bank with currency exchange services and / or foreign branches.
Overview of Bank Account Fees
Here is an overview of the fees associated with the largest banks and credit unions, provided by Consumer Reports. These are not necessarily your best (or only) options, but this chart should provide a good basis before you start to comparison shop:
Consider All Your Banking Options
Consumers have a wide range of banking choices. Community banks and credit unions are often the best places to go for reduced fees, but membership is often limited geographically or by association. If you’re not dependent on a local branch and do most of your banking online – or by telephone, mail, and ATM, then it may be worth considering an online banking account. Major banks and credit unions have a tough time competing with the terms provided by online banks, but your access will be limited.
With so many options to consider, the key is to shop around and do some research before you switch banks. BankRate.com and FindaBetterBank.com are great resources for comparing major, local and online banking services. Keep your financial objectives in-mind and always search for banks with the lowest fees. Although the savings may seem small upfront, they’ll add up over time – you’ll be glad you made the switch!