The best bank for you depends on how you actually use money, not on which one has the most branches

There is no single best bank. The right choice depends on whether you need to deposit cash often, how many times a month you withdraw money, whether you carry a balance on a checking account, what you pay in overdraft fees, and how much you have to keep in savings. A bank that works for someone who gets paid twice a month and never carries debt may cost someone else hundreds of dollars a year.

Start by listing what you actually do with your account: Do you deposit checks by phone or mail, or do you need a teller? Do you use ATMs outside your bank's network? Do you sometimes overdraft, and if so, how often? Do you keep less than $500 in checking, or more than $5,000? Once you know your own pattern, you can compare banks on the fees and features that matter to you, not the ones that sound impressive in advertising.

Key Takeaways

  • Monthly maintenance fees, overdraft charges, and ATM fees vary widely between banks and can cost you $100 to $300 a year depending on your habits.
  • Online banks typically charge no monthly fee and offer higher savings rates, but require you to deposit checks by mail or phone and have no physical branch.
  • Traditional banks charge monthly fees but offer in-person service and ATM networks, which matter if you deposit cash regularly or need to speak to someone in person.
  • Credit unions often have lower fees and better rates than banks, but membership is limited to people who work in certain industries or live in certain areas.
  • The cheapest account is worthless if the bank makes it hard to do the things you do every month.

What fees actually cost you each year

Monthly maintenance fees range from $0 to $15 per month at most banks. If you use a bank that charges $12 a month and you could use one that charges $0, that is $144 a year. Overdraft fees range from $25 to $35 per overdraft at most banks. If you overdraft twice a year, that is $50 to $70 in fees you could avoid by switching banks or by using overdraft protection (a link to savings that covers the shortfall automatically).

Out-of-network ATM fees are usually $2 to $3 per withdrawal. If you withdraw cash four times a month from an ATM that is not your bank's, that is $96 to $144 a year. Some banks reimburse out-of-network ATM fees if you keep a minimum balance or have direct deposit set up. Others charge you every time. The difference between a bank that reimburses and one that does not can be $100 a year or more if you use ATMs often.

Add these three categories together for your own situation. If you overdraft once a year, use out-of-network ATMs twice a month, and your bank charges a $10 monthly fee, you are paying roughly $100 a year in fees. A bank with no monthly fee, overdraft protection, and ATM reimbursement would cost you nothing.

Online banks versus traditional banks

Online banks (such as Ally, Charles Schwab, and Discover) charge no monthly maintenance fee, offer no overdraft fees on debit transactions, and reimburse all out-of-network ATM fees. They also pay higher interest rates on savings accounts—often 4% to 5% annually, compared to 0.01% at most traditional banks. The trade-off is that you cannot walk into a branch, deposit cash at a teller, or speak to someone in person without calling.

Online banks work well if you get paid by direct deposit, deposit checks by mail or mobile app, and rarely need cash. They work poorly if you deposit cash regularly, need to speak to a banker in person, or want to apply for a loan and prefer to do it face-to-face.

Traditional banks (such as Bank of America, Wells Fargo, Chase, and regional banks) charge monthly maintenance fees ($10 to $15 is common), charge overdraft fees ($25 to $35 per overdraft), and may charge out-of-network ATM fees. They offer in-person service, physical branches, and the ability to deposit cash at a teller. Many offer overdraft protection if you link a savings account.

Traditional banks make sense if you deposit cash regularly, prefer in-person service, or want to build a relationship with a banker for future loans. They cost more in fees, but the convenience may be worth it depending on your situation.

Credit unions and their membership rules

Credit unions are nonprofit financial institutions that often charge lower fees and pay higher interest rates than banks. Many credit unions charge no monthly maintenance fee, no overdraft fees on debit transactions, and reimburse out-of-network ATM fees. Some pay 3% to 4% on savings accounts. The catch is that you can only join if you meet their membership requirement.

Membership requirements vary. Some credit unions are open to people who work for a specific employer (such as a university or government agency). Others are open to people who live in a specific county or state. Some are open to members of a specific profession or industry. A few are open to anyone who lives in the United States and pays a one-time membership fee (usually $25 or less).

If you are may be able to access to join a credit union, compare its fees and rates to the online banks and traditional banks in your area. Many credit unions offer better rates and lower fees than both, especially on savings accounts. You can search for credit unions you are may be able to access to join at CO-OP.org or Shared Branch Locator, which show you which credit unions you can access and what their fees are.

How to compare banks on the things that matter to you

Write down your own banking pattern. How many times a month do you withdraw cash? How many times a month do you overdraft (or do you never overdraft)? Do you deposit checks, and if so, how? Do you keep money in savings, and if so, how much? Do you ever need to speak to someone in person?

Then visit the websites of three to five banks and look up their fee schedules. Most banks publish a document called a "Schedule of Fees" or "Pricing Information" that lists every fee they charge. Write down the monthly maintenance fee, overdraft fee, out-of-network ATM fee, and any minimum balance requirement. Calculate what you would pay in a year at each bank based on your own pattern.

For example: If you withdraw cash four times a month from out-of-network ATMs, overdraft once a year, and keep $2,000 in savings, compare the annual cost at Bank A (which charges $12/month, $35 per overdraft, $3 per ATM, and reimburses ATM fees if you keep $1,500 in savings) versus Bank B (which charges $0/month, $0 per overdraft on debit, and reimburses all ATM fees). At Bank A, you pay $144 in monthly fees plus $35 in overdraft fees, for a total of $179. At Bank B, you pay $0. The difference is $179 a year.

Red flags that a bank is not worth the convenience

Avoid banks that charge overdraft fees on debit card transactions. Most modern banks have stopped this practice, but some still charge $25 to $35 every time your debit card is declined or goes negative. This is one of the easiest fees to avoid by switching banks.

Avoid banks that charge a monthly maintenance fee unless you meet a high minimum balance requirement that you cannot maintain. If a bank charges $12 a month but waives the fee if you keep $10,000 in checking, and you only have $3,000, you will pay $144 a year in fees. A bank with no monthly fee is cheaper.

Avoid banks that do not offer overdraft protection or that charge a fee to set it up. Overdraft protection (a link to savings that covers shortfalls automatically) usually costs $0 to $10 per transfer and prevents a $35 overdraft fee. It is worth having if you sometimes overdraft.

How to switch banks without losing money or access

Open the new account first, before you close the old one. This prevents you from being locked out of your money while the switch happens. Most banks can set up a new checking account in 10 to 15 minutes online or in person.

Once the new account is open, change your direct deposit to the new bank. This usually takes one pay cycle to take effect. While you wait, keep enough money in the old account to cover any checks or automatic payments that are still drawing from it.

After one full pay cycle (usually two weeks), check the old account to make sure no new deposits or payments have hit it. Then close it. Some banks charge a fee to close an account early (usually $25), so ask before you close.

Frequently Asked Questions

Can I have accounts at multiple banks?

Yes. Many people keep a checking account at one bank and a savings account at another (often an online bank that pays higher interest). You can also keep a small account at a traditional bank for cash deposits and a main account at an online bank for everything else. There is no limit to how many accounts you can have.

What if I need to deposit cash but I use an online bank?

Some online banks partner with retail locations (such as CVS or Walgreens) where you can deposit cash for free. Others allow you to deposit cash at any branch of a partner bank or credit union. A few do not offer cash deposit at all. Check the bank's website before you open an account if cash deposit matters to you.

Do I need a minimum balance to avoid fees?

It depends on the bank. Some banks waive monthly fees if you keep a certain amount in checking or savings (often $500 to $2,500). Others charge a monthly fee no matter what. Online banks almost never require a minimum balance. Check the fee schedule before you open an account.

What happens to my money if the bank fails?

The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account at banks. Credit unions are insured by the National Credit Union Administration (NCUA) up to $250,000 per account. Your money is protected even if the bank or credit union goes out of business.

Should I choose a bank based on interest rates?

Only if you have money sitting in savings. If you keep less than $1,000 in savings, the difference in interest rates between banks is a few dollars a year and does not matter. If you keep $10,000 or more in savings, the difference between a bank that pays 0.01% and one that pays 4.5% is roughly $450 a year. In that case, the interest rate matters more than the monthly fee.