How to Choose a Bank: Traditional, Online, Credit Union

To choose the right bank for you, consider your current financial situation, your existing banking habits, and your future needs.

Next, find a financial institution that can provide the account types, products, services, and additional features you most want.

Or, you may decide that you may be better off having more than one bank. Having relationships with more than one institution gives you more flexibility in managing your money while giving you access to a wider variety of products, lower fees, and better interest rates.

Whatever you choose, the following are things you should consider before making a decision.

Traditional bank, online bank, or credit union?

There are three main types of personal banking institutions to choose from. Which type is right for you depends on the products and services you need, how you prefer to access your money, and what level of customer service you want.

Traditional banks

Traditional banks (in English) provide financial products and services to their customers primarily through a network of physical branches. Larger banks tend to offer a wider variety of products and services and more branch and ATM locations than smaller banks, online banks, and credit unions.

If you like to do your banking in person and want broader access to local branches and the resources they offer when you have a question or problem, a traditional bank may be your best option.

If receiving services in person is not very important to you or if you prefer an intimate community atmosphere, an online bank or credit union may be a better alternative.

Online banks

Online banks offer similar products to traditional banks but have few or no branches. Because they have fewer operating expenses than traditional banks, fees and interest rates are generally more competitive. However, while online banks have customer service representatives to help you, you won’t be able to walk into a branch if you have a problem.

Credit unions

Credit unions are nonprofit organizations that offer products and services to their members, who in turn are their owners. Because credit unions are owned by their members, they receive profits in the form of lower dues and interest rates on loans, and higher interest on checking and savings accounts.

Members have to meet certain requirements, which are often based on where they live or work, or what organizations they belong to.

If you want to establish a relationship with an organization that has ties in your community, you will probably want to consider local credit unions. You’ll be able to form “a much more intimate relationship”

And because of that relationship, your local credit union may be more willing to work with you than a big bank.

Something to keep in mind is that credit unions (and smaller community banks) may not offer the advanced features, such as mobile banking or online bill pay, that larger banks or online banks may offer.

FDIC or NCUA insurance

You work hard to earn money, so make sure you’re protected. Choose a bank insured by the Federal Deposit Insurance Corporation (FDIC) or a credit union insured by The FDIC NCUA insures your money up to at least a maximum of $250,000 per depositor, so if your financial institution goes bankrupt but is insured, your money will be covered. National Credit Union Administration (in English)

Although most banks and credit unions are insured, some are not. Check here (in English) if your bank is insured and here (in English) if your credit union is insured.

Products and services offered

If your needs go beyond opening a checking and savings account to pay your bills and save for a rainy day, take a closer look at the other products and services offered by your bank.

Many banks and credit unions offer basic loan products, such as mortgages, credit cards, and personal loans. They may also have services that help you manage financial transactions, such as certified checks, cashier’s checks, and automatic bill pay.

But if you need more sophisticated offerings, such as wealth management services and financial planning, you may have to dig a little deeper to find them.

If you want to have all your accounts under one roof, a large national bank is probably the best option, Reposa says. But if you don’t mind having accounts at multiple institutions, you may find better fee structures and interest rates by establishing relationships with more than one bank or credit union.

Interest rates

Interest rates are important for two reasons. Paying less interest on your loans and earning more interest on your savings allows you to have more money in your pocket to reach your financial goals. However, interest rates vary from one entity to another. So, consider comparing interest rates to find the best ones.

Surcharges for the use of accounts and services

Many financial institutions charge surcharges for the products and services they offer. But, like interest rates, surcharges can vary widely. Many entities can waive or lower them if you meet certain criteria, such as maintaining a required minimum balance or setting up direct deposit.

To avoid being surprised by late fees, find out what your bank charges for the products and services you use most before opening a new account. The most common surcharges are…

  • Monthly maintenance fees
  • Overdraft Fees
  • Statement Fees
  • Surcharges for suspension of payment
  • Surcharges for returned checks
  • Surcharges for electronic transfers
  • Cashier’s Check Surcharges
  • Surcharges for certified checks
  • Surcharges for using out-of-network ATMs

Branch and ATM locations

If you prefer to bank in person, the location of your bank’s branches will be an important consideration. Check to see if the bank or credit union you are interested in has branches near your home or office to make banking more convenient for you. If you travel frequently, you may also want to consider whether there are branches in the cities you visit most.

And even if you don’t usually bank in person, find out where the bank’s ATMs are located. Don’t forget to check if there are any surcharges for using an ATM that is not in the branch’s network.

Online banking and mobile banking

If visiting your local branch isn’t your thing, see what technology your financial institution has available that allows you to bank from home or on the go. Check out their online banking, mobile banking, and remote check deposit capabilities, as well as any apps that can make your banking experience more convenient and make your life easier.

With growing concerns about the security of online accounts, you may want to look for a bank or credit union that has dual authentication, which provides an extra layer of security for your banking transactions.

What’s Next?

There are a variety of factors to consider when choosing the right bank for you, including location, availability of products and services, surcharges, interest rates, and more.

Decide what features are most important to you and look for banks or credit unions that offer them. To simplify your search, Reposa recommends checking a comparison website that lets you enter what you’re looking for, and then generating a list of banks and credit unions that match.