What matters when you are choosing a bank
The best bank for you depends on what you do with your money, not on which bank is "best" in general. A bank that works well for someone who keeps $50,000 in savings and rarely moves it will not work well for someone who deposits paychecks weekly and needs to withdraw cash often. Start by listing what you actually need: how often you move money, whether you need a physical branch nearby, what you pay attention to in fees, and how much you want to earn on savings.
The three things that matter most are fees, interest rates, and access. Fees eat into your balance every month if you do not meet minimum balances or if you overdraft. Interest rates determine how much your savings grows while it sits there. Access means whether you can deposit checks on your phone, withdraw cash without a fee, or talk to a person when something goes wrong.
Key Takeaways
- Compare banks on the fees they charge for overdrafts, monthly maintenance, and out-of-network ATM use, because these costs add up faster than interest rates grow your money.
- Interest rates on savings accounts vary widely—from nearly zero at large national banks to 4% or higher at online banks—so the bank you choose directly affects how much your money earns.
- Online banks usually offer higher interest rates and lower fees but have no physical branches, while national banks have branches everywhere but charge more and pay less interest.
- Credit unions often have lower fees and better customer service than national banks, but you must be a member and their hours and locations are limited.
- The cheapest bank is not always the best bank if it means paying overdraft fees every month or driving across town to deposit a check.
Online banks versus national banks: the main trade-off
Online banks (like Ally, Marcus, or Discover) have no physical branches. You deposit checks by taking a photo on your phone, you withdraw cash at any ATM that accepts their card, and you call or email if you need help. In exchange, they pay higher interest rates on savings accounts and charge lower or no monthly fees. If you do not need to walk into a branch, an online bank usually costs less and earns more.
National banks (like Chase, Bank of America, or Wells Fargo) have branches in most towns and cities. You can deposit cash and checks in person, talk to a teller face-to-face, and get a cashier's check the same day. They charge monthly maintenance fees unless you meet a minimum balance, and they pay almost no interest on savings accounts. You pay for the convenience of physical locations.
The choice is simple: if you rarely need a branch, an online bank will earn you more money and cost you less. If you deposit cash regularly or need to speak to someone in person, a national bank is worth the cost.
How to read and compare fee schedules
Every bank publishes a fee schedule, usually called "Deposit Account Agreement" or "Schedule of Fees." Download it from their website before you open an account. The fees that matter most are overdraft fees, monthly maintenance fees, and ATM fees.
Overdraft fees are charged when you spend more than you have in your account. They range from $25 to $35 per overdraft at most banks, and some banks charge multiple overdrafts per day. If you overdraft once a month, that is $300 to $420 a year in fees alone. Some banks offer overdraft protection, which transfers money from savings to checking automatically—ask whether they charge a fee for this.
Monthly maintenance fees (also called service charges) range from $0 to $15 per month. Most banks waive this fee if you keep a minimum balance (often $500 to $1,500) or set up direct deposit. If you cannot meet the minimum, the fee costs you $120 to $180 per year.
ATM fees are charged when you withdraw cash from an ATM that does not belong to your bank. They range from $2 to $3 per withdrawal. If you use an out-of-network ATM twice a week, that is $200 to $300 a year. Online banks often reimburse these fees or partner with large ATM networks to avoid them.
Interest rates: what your savings actually earn
A savings account at a national bank currently earns between 0.01% and 0.05% annual interest. A savings account at an online bank currently earns between 4% and 5.35% annual interest. The difference is enormous. On $10,000, a national bank earns you $1 to $5 per year. An online bank earns you $400 to $535 per year. Over five years, that is $2,000 to $2,675 more in your pocket.
Interest rates change based on what the Federal Reserve does, so the exact number varies by week and by bank. Before you open an account, visit the bank's website and look for "APY" (annual percentage yield). This is the real rate you will earn. Compare the APY across three to five banks you are considering.
Interest rates matter most if you keep money in savings for months or years. If you are saving for a house down payment or an emergency fund, the bank you choose directly affects how much money you have when you need it.
Credit unions: a third option
A credit union is a bank owned by its members instead of by shareholders. You must be a member to open an account, usually by working for a certain employer, living in a certain area, or belonging to a certain group. Once you are a member, credit unions typically charge lower fees than national banks and pay higher interest rates than national banks (though usually lower than online banks).
Credit unions also tend to have better customer service—they answer the phone faster and are more willing to work with you if you overdraft or miss a payment. The downside is that they have fewer branches and ATMs than national banks, and their hours are often limited. If you are a member of a credit union through your employer or neighborhood, it is worth comparing their rates and fees to online banks and national banks.
How to decide: a step-by-step comparison
Write down what you actually do with your money each month. Do you deposit cash? How often? Do you use ATMs? Which ones? Do you call customer service? How often? Do you need a branch? Then answer these questions for each bank you are considering:
- What is the monthly maintenance fee, and what do you have to do to avoid it?
- What is the overdraft fee, and does the bank offer overdraft protection?
- What is the ATM fee, and how many ATMs does the bank have near you?
- What is the current APY on savings accounts?
- Can you deposit checks by phone, or do you need a branch?
- What are the hours and locations of the nearest branch?
Add up the fees you would pay in a year at each bank. Subtract the interest you would earn. The bank with the lowest total cost is the one to choose. This math takes 30 minutes and saves you hundreds of dollars per year.
What to do if you already have an account and want to switch
Switching banks is simpler than it sounds. Open a new account at the bank you want to move to. Give them your old account number, and they will transfer your balance for you (this usually takes three to five business days). Update your direct deposit and automatic payments to point to your new account. Once everything has moved, close the old account.
You do not have to move all your money at once. Many people keep a small account at their old bank for a few months while they make sure all their payments have switched over. Once you are confident everything is working, close the old account.
Frequently Asked Questions
Is my money safe at an online bank?
Yes. Online banks are insured by the FDIC (Federal Deposit Insurance Corporation) just like national banks. Your money is protected up to $250,000 per account. The only difference is that you cannot walk into a branch—your money is just as safe.
What if I need to deposit cash?
Most online banks do not accept cash deposits because they have no branches. If you need to deposit cash regularly, choose a national bank or credit union, or use an online bank that partners with a retail chain (some online banks let you deposit cash at CVS or Walgreens). Ask before you open an account.
Can I have accounts at more than one bank?
Yes. Many people keep a checking account at a national bank for everyday spending and a savings account at an online bank to earn interest. There is no penalty for having multiple accounts, as long as each bank insures your money separately (up to $250,000 per account).
How do I know if a bank is legitimate?
Check whether the bank is FDIC-insured by visiting the FDIC website and searching for the bank's name. If it appears in the search results, your money is protected. Do not open an account at any bank that is not FDIC-insured.
What happens to my interest rate if the Federal Reserve changes rates?
Interest rates on savings accounts move up and down with the Federal Reserve. When the Fed raises rates, banks raise the APY they pay on savings. When the Fed lowers rates, banks lower the APY. You do not have to do anything—the rate on your account changes automatically.