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How to choose a bank

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There's a lot to think about when opening a bank account. Find out how to decide which one is best for you.

Do you need a physical branch?

The first question to ask yourself is whether or not you need a physical branch. If you're a restaurant server or valet parking attendant or have some other job that pays you in cash, you need a bank or credit union where you can deposit cash in a branch convenient to your work or home location.

If you don't need a physical branch, you can consider an online-only bank. Fintech firms like Juno offer better features and lower fees than most banks with large physical footprints. You may also be able to connect your investing accounts with your bank account if you use a service like Wealthfront Cash Account.

Wealthfront invests your money within minutes if you fund your investment account using your cash account. And you have the convenience of having all of your finances in one place. While with Unifimoney, you can set up auto-invest to transfer at least $25 per month into your investing account, using cashback, round-ups from purchases, and the interest from your cash account. Although at the moment Unifimoney is only available on iOS.

If you're paid by direct deposit and rarely use cash, an online bank is probably right for you. I've been online only with no physical branch for over two years!

Do you use ATMs regularly?

I use my credit card for every possible transaction to maximize my travel miles and points. If you manage your credit cards well and pay them off in full every month, cashback and travel rewards cards can make it easy to skip using ATMs.

If you do need cash often, make sure you can use ATMs for free at locations that work well for you. My Schwab Bank checking account offers unlimited ATM fee rebates for the rare times I need cash.

If the bank you want to use charges fees for using other banks' ATMs, make sure your bank has convenient ATM locations near the places you go most.

Do you need a business account?

If you're a small business owner or a solopreneur or are just starting out with a side hustle, there are many reasons why you should keep separate your business income from your personal finances. In fact, to be honest, it's a necessity.

Many banks offer business as well as personal accounts, and you might find a great account at the bank you use for the rest of your money needs. However, if you use a bank that doesn't offer a business checking account, there are no-hassle options out there.

For one, Novo offers an online-only business checking account with no recurring fees. Although it's a barebones online account (you can't deposit cash, for example), it has its perks. The biggest benefit is that you can use Novo's app to cut and send out a paper check.

Other great options are NorthOne and Lili. With Lili for example, you can set up automatic savings buckets to save for things like quarterly taxes. And you can even possibly get paid a few days early when you use direct deposit. Plus, there are no monthly fees or minimum account balances.

And with NorthOne, you can set up envelopes to help you save for your goals, such as taxes or investing. NorthOne business checking also integrates with popular online business services and apps, and you can deposit cash in any Green Dot location for free. Plus as an Investor Junkie reader, you can get three months free when you sign up. 

Here's a quick comparison between the three:

Highlights NOVO NorthOne Lili
Rating 8/10 8/10 8/10
Accounts Checking Checking Savings, Checking
Online deposits
Physical branches
FDIC Insurance
ATM reimbursement
Reviews NOVO review NorthOne review Lili review
Offers Open account Open account Open account

Do you care about overdraft fees?

If you have a habit of overdrawing your bank account, make sure you choose a bank that doesn't charge high fees for overdrafts. For example, at Capital One you can choose from four options for overdrafts, including automatically declining them for no fee.

Ideally, you manage your accounts well and never overdraft. In all of my years of banking, I've overdrafted once when I accidentally pulled out the wrong card at a restaurant. A quick phone call got the fee waived.

But if you often go past zero, don't get stuck paying your bank hundreds of dollars per year for the mistakes.

Do you want free transfers to other accounts?

I have investment and bank accounts at a few different places. So I like the ability to hop onto my online banking app or webpage to transfer funds when needed. For example, if I want to transfer from my checking account to my high-yield savings at Ally Bank, I want it to be quick, easy, and free.

If you care about this type of transfer, make sure your bank offers it and doesn't charge you anything. You shouldn't have to pay to move money between your own accounts.

Also, consider transfers to people at other banks. You could use one of the popular payment apps like PayPal, Venmo, and Square Cash. But some banks let you transfer directly using an online transfer system. And if your bank is a member of the Zelle network, even better! Zelle lets you send same-day transfers to those with an account at a participating bank.

Do you use online bill pay?

Most checking accounts include free online bill pay for sending payments to any biller in the United States. Some billers are set up for quick electronic payments, while others will receive a paper check in the mail.

I use online bill pay to pay my credit cards, my water bill, and a few other occasional bills for which I can't use my credit card. If you use online bill pay, make sure your new bank offers this service for free.

What's most important to you is that you have it and don't have to pay for it. If you can check that box, you're all set here.

Don't forget the fees and interest rates

Last but certainly not least, consider the overall fees and interest rates. Banks commonly charge fees for these types of activity:

  • Overdraft fee
  • Monthly account maintenance fee
  • Minimum balance fee
  • Returned deposit fee
  • Paper bank statement fee
  • ATM fee for non-bank owned ATMs
  • Inactivity fee

Two financial apps, Simple and Chime®, charge no service fees at all. Big banks like Chase, Wells Fargo, US Bank and Bank of America are known for high fees.

Chime disclosure - Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A.; Members FDIC.1Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.^Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account.

For savings, consider the interest rate you get for your account balance. Online banks like Ally and Capital One pay some of the highest rates. Big physical branch banks like those mentioned above are known for lower interest rates.

Choose the right bank for your unique financial needs

There is no perfect bank for everyone, but there's one best for you. So, decide what's most important for you, then start searching for the right institution that meets those needs.

If you can use an online bank, you will find the best interest rates and lowest fees, but you can't deposit cash and may have to pay ATM fees in some cases.

Once you've checked those important criteria, however, you can confidently switch. There is no reason to stick with a bad bank you don't like. Move to a new bank that has your most important needs covered and won't charge you an arm and a leg for your personal banking.

Eric Rosenberg Freelance Contributor

Eric Rosenberg is a finance, travel and technology writer in Ventura, California. He is a former bank manager and corporate finance and accounting professional who left his day job in 2016 to take his online side hustle full time.


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