Start with what you actually use your account for

The best bank for you depends on how you move money, not on which bank has the most branches or the flashiest app. Before you compare banks, write down what you do with a checking account: Do you deposit paychecks? Withdraw cash? Pay bills online? Send money to other people? Use a debit card at stores? The answers tell you which features matter and which ones you will never touch.

A bank that charges you $15 a month but has ATMs everywhere is worse than a bank that charges nothing but requires you to use online transfers. A bank with a great mobile app is useless if you need to deposit checks by mail and the app doesn't support mobile deposit. Start specific, not broad.

Key Takeaways

  • Monthly fees, minimum balances, and ATM access vary widely between banks, so compare the three or four features you actually use before opening an account.
  • Online banks typically charge no monthly fees and pay higher interest on savings, but they have no physical branches and deposits may take longer.
  • Traditional banks and credit unions offer in-person service and faster check deposits, but often charge monthly fees unless you maintain a minimum balance.
  • Read the fee schedule for overdrafts, transfers between accounts, and out-of-network ATM use, because these charges add up fast if you use them regularly.
  • You can open an account at more than one bank, so test a new bank with a small deposit before moving your main paycheck there.

Understand the three main types of banks

Online banks exist only on the internet. They have no branches, no tellers, and no one to call on the phone. In exchange, they charge no monthly fees, pay higher interest on savings accounts, and often have no minimum balance requirement. Deposits work through mobile check deposit (you photograph the check with your phone) or ACH transfer from another bank. Withdrawals happen through ATMs that belong to other networks, or by transferring money back to another account. Online banks work well if you rarely need cash and do not mind waiting a day or two for deposits to clear.

Traditional banks have physical branches where you can walk in, talk to a person, and deposit checks by hand. They typically charge a monthly fee ($10 to $15) unless you keep a minimum balance (often $500 to $1,500) or set up direct deposit. They have their own ATM networks, so you can withdraw cash without paying a fee. They process check deposits faster than online banks. Traditional banks work well if you need in-person service, deposit checks often, or prefer to withdraw cash regularly.

Credit unions are member-owned cooperatives, not corporations. They often charge lower fees than traditional banks and may offer better interest rates on savings. You must be a member to use them, which usually means living in a certain area, working for a certain employer, or belonging to a certain organization. Credit unions are smaller than big banks, so they may have fewer ATMs and branches, but many credit unions belong to shared branching networks that let you use other credit unions' ATMs and tellers for free.

Compare fees and minimum balances

Monthly maintenance fees range from zero to $15 or more, depending on the bank and account type. Some banks waive the fee if you keep a minimum balance, set up direct deposit, or maintain a certain number of debit card transactions per month. Before you open an account, find the fee schedule on the bank's website and check whether you can meet the waiver conditions. If you cannot, the fee will cost you $120 to $180 per year.

Overdraft fees are what a bank charges when you spend more money than you have in the account. These fees typically run $25 to $35 per overdraft, and a single day of overspending can trigger multiple fees if you make several purchases. Some banks charge a fee for each transaction that overdrafts your account; others charge one fee per day. Read the overdraft policy carefully, because this is where banks make money from people who are already short on cash. Some banks offer overdraft protection, which automatically transfers money from a savings account or linked account to cover the shortfall, usually for a smaller fee or none at all.

Out-of-network ATM fees happen when you withdraw cash from an ATM that does not belong to your bank. These fees typically run $2 to $3 per withdrawal. If you withdraw cash twice a week from an out-of-network ATM, that is $16 to $24 per month in fees alone. Check whether the bank has ATMs near your home, work, and places you shop regularly.

Decide between in-person service and convenience

If you deposit checks by mail or mobile app, never visit a branch, and are comfortable managing your account online, an online bank saves you money and pays you more interest. If you deposit checks in person, need to talk to someone about your account, or withdraw cash regularly, a traditional bank or credit union is worth the monthly fee.

Some people use both: a high-interest online savings account at an online bank for money they are saving, and a checking account at a traditional bank or credit union for everyday spending. Money moves between them through ACH transfer, which is free but takes one to three business days. This approach lets you earn interest on savings while keeping the convenience of a local branch for checking.

Check deposit speed and mobile features

If you deposit checks regularly, the speed matters. Traditional banks and credit unions process checks deposited in person within one business day. Online banks that offer mobile check deposit usually take one to three business days to clear the check, meaning you cannot spend the money immediately. Some online banks clear mobile deposits faster if you have been a customer for a while.

Mobile apps vary in what they let you do. Most let you check your balance, view transactions, and transfer money between your own accounts. Some let you deposit checks by photograph (mobile deposit), pay bills, or send money to other people. If you use these features regularly, test the app before you open an account—download it from the app store and look at the interface, even if you cannot log in yet.

Test a new bank before you move everything

Do not close your old account and move your paycheck to a new bank on day one. Instead, open the new account, deposit a small amount of money, and use it for a few weeks. Pay a bill, withdraw cash, deposit a check if you plan to do that regularly, and see whether the app works the way you expected. If something frustrates you or costs more than you thought, you can close the account and go back to your old bank without losing money.

Once you are confident, you can set up direct deposit at the new bank and gradually move your regular payments over. Keep your old account open for at least a month after your last paycheck clears, in case a payment bounces or a company still tries to withdraw from the old account.

Frequently Asked Questions

What happens if I keep money at two banks at the same time?

Nothing bad. You can have checking and savings accounts at multiple banks. Money moves between them through ACH transfer, which is free but takes one to three business days. The only limit is that federal law caps transfers out of a savings account at six per month, though most banks have stopped enforcing this rule.

Do I need a minimum balance to open an account?

Most banks do not require a minimum deposit to open an account, but they may charge a monthly fee if your balance falls below a certain amount. Online banks typically have no minimum balance at all. Check the bank's website or call before you open an account to confirm.

Can I switch banks if I have automatic payments set up?

Yes, but you need to update the account number with each company or person you pay. This includes your employer (for direct deposit), your landlord, your utility company, your insurance company, and anyone else who withdraws money from your account automatically. Update them before you close your old account, or keep the old account open for a few weeks while payments transition.

What if I overdraft my account by accident?

Call the bank immediately and ask them to reverse the overdraft fee. Many banks will reverse one or two fees per year if you ask, especially if you have been a customer for a while and do not overdraft regularly. If they refuse, you can close the account and move to a bank with lower overdraft fees or overdraft protection.

Is my money safe if the bank fails?

Yes. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account holder per bank. If the bank fails, the FDIC pays you back. Credit unions are insured by the National Credit Union Administration (NCUA) up to the same limit. Check that your bank or credit union is FDIC or NCUA insured before you open an account—the information is on their website.