Which Bank Is Better For Students – Choosing a financial institution to look after your money is one of the most important financial decisions you can make. Different banks offer vastly different levels of service, charge different levels of fees and will pay you vastly different amounts of interest on your money.
In practice, this means that choosing the best bank for you is rarely a one-time process. The best bank for you will likely change over your lifetime as your financial and investment goals evolve. For this reason, a useful tip is to remember that there is no limit to the number of bank accounts you can keep, nor how often you switch banks.
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Diversifying your bank accounts—just like you do your investments—can allow you to get the most out of your money. In this guide, we’ll look at the three most important factors in choosing a bank for checking and savings accounts: the type of bank, the interest rates and fees it charges, and the extra features it offers.
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The first and most fundamental factor in choosing a bank is the type of institution that is right for you. There are at least three different types of financial institutions that can reasonably be referred to as a bank, each offering a unique set of advantages and disadvantages,
Traditional banks are what most people think of when they think of a bank. These banks offer services to their customers largely through a branch network and provide ATMs to both their own customers and customers of other banks. Many have also started offering online banking services for paying bills and making deposits.
While these banks have been around for the longest time, today there are fewer reasons to choose a brick-and-mortar bank over its online competitors or credit unions. As we will see, both of these institutions offer lower fees than traditional banks.
That said, you may prefer to do your banking in person. If you have a question or a problem, you can go to your local branch and talk to someone about it. This could make a traditional bank the right choice for you. But it’s still worth checking out the other options available to you.
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If you choose a traditional or online bank, be sure to choose one that is insured by the Federal Deposit Insurance Corporation (FDIC), which covers $250,000 for each depositor, per account class.
Online banks were relatively rare 20 years ago, but their popularity has increased over time, making them direct competitors for traditional banks today. Because online banks have fewer or no physical branches, their overhead costs are much lower than traditional banks, which means their fees are also much lower.
That being said, many people find the customer service offered by purely online banks disappointing. The industry knows this. The best online banks now offer extensive customer support options, but you still won’t be able to go into a branch to speak to a bank employee in person.
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In recent years, the dividing line between online banking and traditional banking has become increasingly blurred as the digital services and tools offered by the latter have become more advanced. This means it may be possible to enjoy the benefits of a brick-and-mortar branch while still accessing the convenience of digital banking.
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Credit unions are often overlooked as an alternative to traditional and online banks, but they have advantages that can make them a good choice.
First, credit unions are nonprofit financial cooperatives. This means they are member-owned, so profits are returned to their members through lower fees and higher interest rates on deposit accounts. In contrast, traditional publicly owned banks must meet revenue targets and be beholden to shareholders.
And second, most credit unions maintain genuine relationships with their local communities. If you want a bank that gives something back to your community, a credit union may be the natural choice for you.
However, credit unions may have fairly strict rules for members’ access to services, and not all offer features such as online banking. This can make it a less than optimal choice for a checking account that you need to access and work with on a regular basis.
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If you choose to bank with a credit union, make sure it is insured by the National Credit Union Administration (NCUA). Like the FDIC, it insures up to $250,000 for each depositor annually.
The next factor to consider when choosing where to bank is an institution’s fees and interest rates it offers. Most people will have two main accounts: a bank account and a savings account. The features you need for each type of account vary, and very often it makes sense to have these accounts at different institutions.
Most banks will charge a monthly fee for maintaining a checking account, but these fees can vary widely. And a bank may waive or reduce them if you meet certain criteria, such as meeting and maintaining a minimum balance requirement or setting up direct deposit for your paychecks.
To keep these fees to a minimum, it’s important to understand what a bank will actually charge you for using a checking account. Ask about its common fees, which may include:
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Fees are by far the biggest differentiator between checking accounts. All else being equal, you should choose the checking account with the lowest fees.
For your savings account, look for a different set of features. You don’t need to access a savings account as often as you do a checking account, so you’re unlikely to need apps or online banking services. And as long as you don’t make frequent withdrawals, most savings accounts don’t come with high fees.
Instead, the main way these deposit accounts differ is in the interest rates they pay. These can vary widely, and the best rates are often those offered by credit unions or online banks. Shop around to find the best interest rate on your savings.
The two factors we’ve looked at so far—the type of institution you choose and how much it will cost you in fees or lost interest—are the most fundamental aspects of choosing a bank. However, most banks will also offer a number of other services, discounts or features that may be critical to you.
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Because everyone’s needs are different, take some time to think about how you’re using the accounts you currently have and where you’re wasting money on fees or time. Then look for a bank that is a better fit. Important factors may include:
This last point is related to another – that ultimately, the bank you choose should be one you trust. Many people still make their banking decision based on the company their parents do business with or simply because they trust the name and reputation of a large national bank. There’s nothing wrong with that – peace of mind is arguably the most important service offered by any bank and should be part of the decision-making process.
The best way to choose a bank can be summed up quite easily. A good bank is one that:
So make a list, rank some options based on these criteria, and see which bank or credit union comes out on top. Just remember—you can always change your mind later or open a second account if your first choice turns out not to be optimal for you.
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Requires authors to use primary sources to support their work. These include white papers, government data, original reports and interviews with industry experts. We also cite original research from other reputable publishers where appropriate. You can learn more about our standards for producing accurate, unbiased content in our editorial policy. When deciding where to open your financial accounts, you may wonder: Should I go to a bank or credit union? Today there is less difference between the two in terms of convenience, especially if the credit union you are considering has good online services and is part of a cooperative that provides access to branches and ATMs around the world. Both banks and credit unions also offer the same security for your money through insurance backed by the federal government.
As you consider banks and credit unions, think about what matters most to you—for example, an array of ATMs or the lowest fees on a checking account.
Banks are owned by investors and run as for-profit institutions, and banks must make a profit for their investors.
Anyone, including individuals or companies, can open a bank account. Customers don’t have a vote or say in how a bank is run, unlike a credit union, which has membership. In a bank, you are a customer. In a credit union, you are a member.
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Banks offer both personal and commercial banking products, including business credit cards and business loans. Banks may offer investment and savings vehicles such as individual retirement accounts (IRAs), certificates of deposits (CDs), and money market accounts.
When looking for any type of loan, it’s always best to check with both local banks and credit unions. Online banks may offer lower interest rates than institutions with an online presence, but banks usually can’t compete
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