How to Choose a Bank Account

Opening a bank account seems simple until you start looking at your options. The range of possible account types, banks and account features can seem overwhelming. Don’t let the variety confuse you. Understanding your options and shopping carefully can get you significantly better deals. 

Before opening an account, you’ll need to look carefully at the available banks, the different types of accounts and the specific terms offered by different banks. Selecting the right type of account for your needs and shopping for the best available terms can save you money and make your financial life simpler.

Types of Banks

There are several types of financial institutions to consider. No one type of bank is best for everyone. Each has advantages and disadvantages, and you’ll have to choose what best fits your specific needs: 

  • Credit unions are financial cooperatives that are owned by their depositors. They are known for high standards of customer service, low fees and high-interest rates on deposits. They may have limited branch and ATM networks and online banking options. 
  • Local banks also tend to offer good customer service and are often oriented toward smaller depositors. Like credit unions, they may have a limited range of services and smaller branches and ATM networks. 
  • National banks offer wide ranges of products and services and have well-developed networks and extensive online banking options. They may also be oriented towards larger depositors. The service offered to small depositors may seem remote and impersonal. 
  • Online banks have no branches and exist entirely online. They have low overhead and often pay high-interest rates on deposits and have low fees. They have excellent online banking options and may be ideal for depositors who are comfortable working entirely online. 

Any bank you’re considering should have deposit insurance. Bank deposits are usually insured by the Federal Deposit Insurance Corporation (FDIC). Credit union deposits are insured by the National Credit Union Administration (NCUA) or by State or private insurers. Both types are usually insured up to $250,000. Always confirm that deposits are insured. 

Choosing a Bank Account

There are several major types of bank accounts. Most people will need at least a checking account and a savings account, and you may wish to consider other types of accounts as well. Here’s what to look for in each type of account:

  • Checking accounts are designed for day-to-day banking. There are usually no limits on transactions, and you can access your money with a debit card, ATMs and checks. Most checking accounts pay no or very little interest and some may even charge a fee to keep the account open. Pay attention to the minimum deposit and the fees, especially overdraft fees.
  • Savings accounts are safe places to store money that you might need quickly. They usually allow a limited number of monthly transactions and pay relatively low interest rates, often under 1%. Some online banks offer relatively high-yield savings accounts. Look for low fees, low minimum deposits and the best interest rate you can get.
  • Money Market Accounts are similar to savings accounts (they limit the number of monthly transactions you can make), but offer slightly higher interest rates. They often have higher minimum balance requirements than savings accounts. Look for a money market account with higher interest than your savings account, reasonable fees and a low minimum balance. 
  • Certificates of Deposit (CDs) pay significantly higher interest rates than other types of accounts, but you’ll have to commit to keeping the money in the account for a fixed period of time. If you withdraw early you may forfeit your interest earnings. These accounts are ideal for keeping money that you are saving for a future event that has a predictable schedule. Read the terms carefully!

Remember that you don’t have to keep all of your accounts at one institution. You can keep your checking account with your day to day funds in a local bank or credit union and your savings account in an online bank, or any other combination that you choose.

Key Considerations

There are some features you’ll want to think about no matter what type of account you’re considering:

  • Interest rates. If you’ll be keeping money in a savings account, money market account or CD, you want that money to work for you. Look for the highest interest rate you can get. 
  • Fees. Fees are a major revenue generator for banks, and there are lots of them. Watch for maintenance fees, overdraft fees, ATM fees and others. Finding bank accounts with low fees can save you hundreds of dollars every year. 
  • Accessibility. Look for a bank that has branches and ATMs in locations that are convenient for you, especially if you prefer to do your bank business in person. 
  • Online features. Most banks now offer some level of online banking, whether website-based, mobile app-based or both. If online banking is important to you, compare the online features of the accounts you’re considering and make sure they will meet your needs–for example, whether the online bank allows you to wire funds out. 
  • Service. Customer service may not seem like an important feature, but that changes the moment you have a problem. Visit branches in person to see how they respond to questions and do online searches to see if the banks you’re considering have a reputation for good (or bad) service. 
  • Terms and conditions. Each account at each bank has its own terms and conditions. They may be hard to understand, but they’re important. Read them fully, including the fine print and ask for clarification of any point that isn’t clear. Comparison shopping can help you get the best deal! 

If you’re considering different types of accounts at different institutions, review your options in detail and select the one that fits your needs best.


If this seems like too much work to do to open a simple bank account, think again. That simple bank account may be the vehicle for almost every financial transaction you make, or the repository for much of your savings. Small differences in fees, interest rates or terms could add up to a significant amount over the years. Taking the time to get the right accounts at the right institutions can make your financial life far simpler!

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