Which Bank and Bank Account Should You Choose?

The decision should factor in your needs and bank policies

bank teller helping customer open an account
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If you're signing up for your first checking account or recently moved to a new area and need a new bank, you might be wondering where to bank and which bank account you should open for your personal needs.

Some people choose to keep accounts at multiple banks to keep their business and personal expenses separate, while others transact through one bank for simplicity. You don't need a reason to look into banks and the services they offer, but careful consideration of your needs and lifestyle can help you make an informed decision.

Deciding Which Bank to Choose

Make the following considerations when choosing where to bank.

Explore different bank types. Retail banks, which offer basic banking services to consumers, are the most appropriate for everyday banking. Among these, you can choose traditional brick-and-mortar banks if you prefer an institution with a physical presence, or an online bank if you're tech-savvy and don't need to visit a physical branch. You may also be eligible to join a credit union, which is a non-profit institution that serves the banking needs of people with a common employer, labor union, or professional interest.

Settle on the right size. Large retails banks are often household names in banking and tend to have locations all over the U.S., which is a plus if you travel a lot for work or leisure. You'll have easier access to your money when you're away and may be able to avoid foreign bank ATM fees. Otherwise, you might find that the products and customer service at a smaller bank are a better fit for you. Community banks, for example, take deposits and lend locally, resulting in a more personal relationship with your bank.

Narrow your location. If you choose a brick-and-mortar bank, locate the nearest bank and ATM along with the wider service area. If a financial emergency arises, you don't want to have to drive a long distance to get to a branch.

Look for appropriate products and services. In addition to basic bank accounts, most retail banks generally let you open checking and savings accounts, credit cards, loans, and safe deposit boxes. Some banks go beyond the basics and offer innovative features like smartphone apps, which can be a good choice if you're always on the go. The offerings of the institution where you bank should ultimately match your current and anticipated needs.

Understand the costs. Banks charge interest on loans and impose monthly maintenance fees, overdraft fees, and wire transfer fees for account use, to name a few. Large and small banks and credit unions also charge these fees, although they tend to be lower at online banks and credit unions. Before you decide where to bank, compare the costs at different banks to minimize fees.

Figure the interest. The balance in certain accounts like savings accounts accrues interest. Online banks and credit unions tend to pay more interest on your balances.

Determining Which Bank Account to Open

Once you decide where to bank, follow these tips for account selection.

Set a goal. Your reason for opening an account will dictate the type of bank account you should open. For example, you might want to write checks to pay bills or establish an emergency fund so that you're covered in the event of a job loss or surprise medical expense. Or, you might want to save for a long-term achievement like a down payment on a house. Pin down exactly why you want to save.

Open the right account type. Pick a bank account that accommodates your goal. For example, you might choose a checking account or savings account for everyday banking, a money market account for your emergency fund, or a certificate of deposit (CD) for your long-term needs. You might also want to set up a savings account at the same time you establish a checking account. Doing so will allow you to link the accounts and manually transfer money between accounts or set up automatic transfers to make it easier for you to save money on a regular basis.

Watch out for transaction limits. Savings and money market accounts limit you to six withdrawals or transfers in a month. Checking accounts aren't as restrictive, but may only allow you to make debit card purchases and ATM withdrawals of up to a certain dollar limit each day. If you typically make purchases above that limit, you should open a bank account with a higher daily spending limit.

Take stock of the fees. Fee schedules vary by account type. Check the website for the bank account you're considering to find out about monthly maintenance fees, early withdrawal penalties for CDs, and other fees to determine if you can afford it. Free accounts—those with no monthly maintenance fee—still exist, and it's worth finding one if your goal is to minimize banking expenses.

Assess the minimum balance requirements. This is generally the minimum amount you need to keep in a single for-fee bank account or in total deposits at the bank to avoid paying the monthly maintenance fee. It can range from $25 to $10,000, so if you want to avoid paying maintenance fees, choose an account with a balance requirement that doesn't overextend you financially. You might be better off opening a free bank account if your usual average balance is low or middle-of-the-road.

Many banks also waive monthly fees if you receive a certain amount in direct deposits into your account in a statement period, have other products open with the bank, or are a senior citizen.

Read the Fine Print

Carefully read over any bank brochures you receive as well as the bank account agreement to ensure that you understand the terms and conditions of your new bank and bank account.

In addition to daily limits on debit purchases, some accounts limit the number of free checks you can write in a statement period. Likewise, the bank might have unique policies regarding when funds will become available for withdrawal or how to stop payment on a check.

If your bank offers online options to manage your account, the fine print matters even more because a lot of convenience options are addressed with the services available online. There might be charges associated with online banking or bill pay, for example. Before you open a bank account, ask questions if you're not sure what a policy means or how it will affect you.

What to Do If the Bank Denies Your Application

Banks don't want to lose money any more than other businesses do, so they might decline your business if they deem you to be a risky customer because you have a poor banking history. Most banks check your bank account activity and account closure history with ChexSystems, a reporting agency for consumer banking activity.

If you have a history of overdrafts or, worse, if another bank closed your account because you wrote bad checks, you might have difficulty opening a new account. You might qualify for only a "second-chance" account that doesn't require a review of your ChexSystems report. You'll probably have to pay higher-than-average fees for these accounts, but you can usually "graduate" to a traditional bank account after a period of time if you don't make further mistakes.

If you're denied for a bank account, federal law requires the bank to issue you an adverse action notice naming the company that supplied the negative information that led to your denial. It's important to review this notice and obtain a free copy of your ChexSystems report within 60 days of receiving the notice to find out what factors influenced the bank's decision. This way, you can take steps to correct problematic banking behaviors and ensure approval of your next bank account application.

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