- Understand the differences between bank types
- Learn what to look for when choosing a bank
- Discover strategies for using multiple banks
- Know which fees to avoid
The Three Main Options
When it comes to where to keep your money, you have three main choices. Each has distinct advantages.
1. Traditional Banks
These are the big-name banks you see everywhere - Chase, Bank of America, Wells Fargo, etc. They're for-profit corporations owned by shareholders.
Traditional Banks
Pros
- Extensive branch and ATM networks
- Full range of financial products
- In-person customer service
- Well-established mobile apps
- Easy to deposit cash
Cons
- Higher fees overall
- Lower interest rates on savings
- Minimum balance requirements
- May push unnecessary products
2. Credit Unions
Credit unions are not-for-profit cooperatives owned by their members. Profits go back to members through better rates and lower fees.
Credit Unions
Pros
- Lower fees than traditional banks
- Better interest rates (savings & loans)
- Personalized customer service
- Community-focused mission
- Shared branch/ATM networks
Cons
- Membership requirements
- Smaller branch networks
- Technology may lag behind
- Fewer product options
- Where you live (community credit unions)
- Where you work (employer-based)
- Family members who are already members
- Organizations you belong to
3. Online Banks
Online banks operate entirely through websites and apps - no physical branches. This lets them offer significantly better rates.
Online Banks
Pros
- Highest interest rates (4-5% APY)
- Low or no fees
- No minimum balance requirements
- ATM fee reimbursements
- 24/7 access via app
Cons
- No physical branches
- Cash deposits can be difficult
- Customer service is phone/chat only
- Transfers can take 1-3 days
What to Look For in a Bank
When evaluating any bank, consider these key factors:
Fees to Watch
- Monthly maintenance fees: Look for accounts with no monthly fee or easy ways to waive it (direct deposit, minimum balance)
- Overdraft fees: Average is $35 per incident. Some banks offer overdraft protection or no overdraft fees
- ATM fees: Using out-of-network ATMs can cost $3-5 per transaction
- Wire transfer fees: Can be $25-50 for domestic transfers
- Paper statement fees: Some charge $2-5 for mailed statements
Interest Rates
For savings accounts, the APY (Annual Percentage Yield) matters significantly over time:
APY Comparison: $10,000 Over 5 Years
| Bank Type | APY | 5-Year Earnings |
|---|---|---|
| Traditional Bank | 0.05% | $25 |
| Credit Union | 1.50% | $776 |
| Online Bank | 4.50% | $2,462 |
Convenience Features
- Mobile app quality: Can you deposit checks, transfer money, and pay bills easily?
- ATM network: How many free ATMs are near you?
- Customer service hours: Can you reach someone when you need help?
- Zelle/Venmo integration: Can you easily send money to friends?
The Multi-Bank Strategy
Many financially savvy people use multiple banks to get the best of each:
Example Setup
-
Local credit union - Checking Account
For everyday spending, ATM access, and cash deposits
-
Online bank - High-Yield Savings
For emergency fund and savings goals (earning 4-5% APY)
-
Link them together
Transfer between accounts as needed (usually free, takes 1-2 days)
Red Flags to Avoid
Be cautious of banks that:
- Charge monthly fees with no way to waive them
- Have excessive overdraft fees with no protection options
- Offer interest rates far above market (could be a scam)
- Aren't FDIC or NCUA insured
- Have many complaints with the Consumer Financial Protection Bureau (CFPB)
How to Switch Banks
Switching banks is easier than you think:
- Open your new account (usually takes 10-15 minutes online)
- Keep both accounts open for 1-2 months during transition
- Move your direct deposit to the new account
- Update automatic payments with new account info
- Transfer remaining balance and close old account
Pro tip: Many banks offer sign-up bonuses ($100-$300) when you open an account and meet certain requirements like setting up direct deposit.