Although it can be challenging to find the proper bank account for you, it is a critical step in your financial journey. Find out how to narrow down your search for the right bank and what factors influence your decision.
Consider the different types of accounts that you can open
Are you looking to make savings or just a checking account? Decide what types of bank accounts are best for you, and then search for the bank that offers them. These are the most basic types of accounts.
- You can check: This is where you keep the money that you will spend frequently.
- Save: This account can be used to stash money that you don’t mind not touching for a while. You might want to save money for big trips, build an emergency fund or buy a house.
- Certificates of Deposit: Certificates of Deposit or CDs store your money for a set time (like a year or two), and lock in your interest rates for the entire term. CDs are helpful for those who don’t require immediate access to their money or don’t want to worry about the rate changing as much later than with savings accounts.
- Money market account: This account works the same way as a savings account, except that banks often make it easier for you to access your savings by sending a debit card and paper checks.
Learn more about the other services that the bank offers
Many people prefer to manage all of their finances through one company. You might be interested in more than just storing your money at the bank. Check out whether it offers any of these products and services.
- Investment accounts
- Other loans (personal and auto loans, private student loans, etc.
- Credit cards
- Financial planning
Decide what additional tools you need from your bank if any, and then choose the one that best suits you.
Take into account the interest rates
Checking accounts seldom pay interest or have meagre rates of interest. If you are opening a savings, CD or money market account, you need to consider how much interest you earn.
A high interest rate may not be an essential consideration when selecting a bank. You may like a bank with low rates but high-interest rates. Even if you don’t care about high interests, rates but make sure you choose a company that offers competitive rates.
Lookout for institutions that charge low fees
Opening different bank accounts may not be a good idea. Let’s suppose you have three accounts at an institution. Each account has a monthly fee, which can add up quickly!
You’ll want to find a bank that charges monthly service fees.
- There are no fees: The bank charges no monthly service fees for your account(s), regardless of what.
- You can get a fee waiver: Many banks charge monthly fees. However, you can waive them by keeping a minimum amount or using your debit card only a limited number of times each month. You’re likely to be able to waive the monthly fee if you are confident.
- Low fees: You may not be eligible for a monthly fee waiver, but you must pay the fee at a rate you can afford. You may be fine with £5 per month but decide to leave banks that charge £10 and £15 monthly.
You should also keep these fees in mind:
- Overdraft fees: Find out what a bank charges you if you are concerned about overdrawing your checking account. You can expect to pay between £30 and £35. Although you can set up overdraft coverage, many banks will charge a lower fee if you need to use it. Many institutions do not charge for accessing protection.
- ATM fees: What is the ATM network’s size? Will a bank charge an additional fee to use an ATM not part of the ATM network? Find out if the bank will reimburse fees charged by ATM providers outside of its network.
- Transaction fee (beyond a certain limit): Legally, you cannot withdraw from savings or money market accounts more than six times per month to avoid a penalty. Check out what bank charges you for exceeding your limit. (Note: During the coronavirus pandemic, some banks stopped charging excessive transaction fees.
- Foreign transaction charges: Find out the fees charged by banks for international debit cards.
You can choose between brick-and-mortar or online
Decide if you prefer an online bank or a bank with physical branches.
If you prefer the feeling of being able to see a banker in person, a brick-and mortar bank may be a better option. Online banks usually charge higher interest rates and have lower fees.
Decide what is important to you, and then choose between digital or in-person banking.
You can choose between a bank or credit union.
These are the key differences between banks and credit unions.
- Banks: These banks are more likely to have branches than credit unions and can pick up new technology faster. Online and in-person banks offer more products than credit unions, such as loans and credit cards.
- Credit unions: Credit unions are more personal than banks and offer better customer service. Credit unions pay higher rates than brick-and-mortar banks.
- Bank platforms: Online platforms offer accounts but are not technically banks. Because they have insurance partners, they are entirely safe. Many online banking platforms offer extra incentives, such as budgeting tools and high-interest rates.
Your bank should be accessible
It should be easy to access your money. You should ensure that there are ATMs and branches near your office or home if you choose a brick-and-mortar bank. You may need a bank with an extensive ATM network and branches if you plan to travel within the country.
Online banks also have ATM networks, so be sure to check for machines nearby that you can use free of charge.
What are the hours of customer support? If you are unable to speak with a representative during work hours, ensure that the institution is available during business hours.
Read the fine print
The most important thing you should look for when choosing an institution is whether they are insured. This ensures that your money is protected in the event of a bank failure. It is a good idea to inquire about the bank’s services if you have a friend or relative with an account.