Strategy Beginner: Choosing a Savings or Checking Account

Introduction to Choosing a Savings or Checking Account Evaluating Banks and Credit Unions Evaluating Financial Institution Fees Checking Accounts Online Savings and Checking Accounts Savings and Checking Accounts for Teenagers Summary of Choosing a Savings or Checking Account
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Evaluating Banks and Credit Unions

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Evaluating Banks and Credit Unions

What parts of the banking experience are most important to you? To some people, customer service and convenience are everything. To others, saving money on fees is everything. Still others care mostly about the reputation of the institution, while others are motivated most by the services that it offers. Everyone is different. If you haven’t given it much thought, consider evaluating your own bank or credit union and asking yourself whether it is what you really want. If you do not have one, then look at the features and services listed below and ask yourself which of them matter most to you.

Things To Know

  • Look at the features and services and ask yourself which of them matter most to you.
  • Generally, the larger institutions offer more services than the smaller ones.

Features

Here are the typical features considered:

  • Convenience. Are there branches near you? Is there online access? Online bill pay? Do the hours fit your schedule?
  • Interest or dividend rate. One of the most considered features is what you can expect to earn. What interest or dividend rates are being offered? (Interest is paid on bank accounts, while dividends are paid on credit union accounts). Because credit unions are not-for-profit, they often can afford to pay slightly higher rates than banks. Look for the "annual percentage yield," which takes compounding of earnings into account.
  • Limits. What limits are imposed on your account? Is the number of transactions limited, for example? Do you have to wait a certain length of time before you can withdraw your funds after you’ve deposited them?
  • FDIC or NCUA membership. If a bank is a member of the Federal Deposit Insurance Corporation, or if a credit union is a member of the National Credit Union Association, your savings will be insured for up to $250,000.
  • Size. Larger institutions tend to offer more services and options, while smaller ones tend to offer (as a general rule) more attentive customer service.
  • Minimum deposit. What is the minimum deposit required to open an account?
  • Fees. Fees are often the make-or-break feature of an account. Compare the fees at different institutions.
  • Incentives for keeping other accounts under the same provider.

Services

Generally, the larger institutions offer more services than the smaller ones. They usually have in-house staff to tend to such services as investments and financial planning.

Services include the following (not all institutions offer all of them):

  • Online services, including online bill paying
  • ATMs
  • Direct deposit
  • Credit cards
  • Debit cards
  • Telephone servicing
  • Canceled checks
  • Loans, including mortgages, business loans, and auto loans
  • Overdraft protection
  • Investments—stocks, bonds, mutual funds, money markets, etc.
  • Foreign currencies
  • Financial planning services
  • Financial planning software and budgeting tools
  • Estate planning services
  • Retirement accounts
  • Retirement planning services
  • Health savings accounts
  • Business accounts
  • Business services
  • Variations on existing accounts (e.g., vacation savings accounts)
  • Money markets
  • Copies of previous monthly statements
  • Traveler’s checks
  • Mortgage refinancing
  • Safe deposit boxes
  • Cashier’s checks
  • Money orders
  • Wire transfers
  • Educational programs
  • Automatic savings and investment options