Choosing the right bank can be tricky, especially if you aren’t quite sure what to look for and haven’t had to make any big purchases that involve big loans — like a mortgage or a car loan.
With so many options out there these days, it can be easy to just stick with the big mega bank you’ve been using for years. In fact, most Americans have a checking account with one of the four largest banks: Bank of America, Chase, Citibank and Wells Fargo. According to Consumer Reports, these “big banks” hold about 40% of all U.S. commercial bank assets. They’re also convenient, with more than 17,000 branches and more than 80,000 ATMs, and they offer easy-to-use digital tools and resources.
But with all the various banking options available to you these days, there are several factors to take in to account when deciding which bank — or credit union — is best for you.
Read more: 33 ways to make extra money each month
Survey says: Bigger is NOT better
According to Consumer Reports data, all four “mega banks” scored in the bottom fifth of a recent survey, which rated more than 74,000 banks and credit unions.
Customers of the big banks weren’t necessarily unsatisfied, they just discovered that once they shopped around, they were able to find better banking alternatives at smaller banks — including some that only operate online. The survey found that consumers were also more satisfied with credit unions, particularly concerning customer service and fees.
How to choose a better bank for you
The good news is that if you aren’t 100% satisfied with your bank, choosing the best bank that fits your needs is now a lot easier than ever. And even if you do feel satisfied with your bank, it’s crucial that you shop around to make sure you’re getting the best bang for your buck.
If all of your finances are in one place — so let’s say your checking account, savings account, car loan and home loan are all with one bank — then you may get some added benefits or fee discounts for that. But according to Consumer Reports, “when you buy a ‘product bundle’ at a bank which contains a number of services rolled into one offering, it’s hard to know if the fees you pay are lower than if you opted to get different services at different banks.”
There are so many low-cost and convenient options available these days, you don’t have to settle for one bank or one offer.
In fact, you can get specific services from as many banks as you want — which can often be the best way to get the best deal on each product or service.
How to shop for the best deal on each of your financial needs
If you shop around for the best deal at different financial institutions, there’s a good chance you’ll save some money. According to Consumer Reports, 38% of people said they have a second bank or credit union they do business with, because they “were able to get better rates for some services and products at other institutions than their primary bank or credit union.”
Most people stick with the same old bank because they just don’t want to deal with the hassle of moving everything — but it can be a lot easier than you think.
Online banks are now offering much higher rates on savings accounts — significantly higher than the current rates at traditional, bigger banks. So with that in mind, why not just move your savings to take advantage of the bigger return?
Bottom line: You aren’t tied to one bank no matter how long you’ve been doing business there. With so many options available, you will very likely find better deals if you start looking around. Do some research and find the best bang for your buck on each service you need — or may need in the future (like a mortgage or car loan).
What to look for to get the best service & lowest fees
Here are a few tips from Consumer Reports to help you get the best deals on all of your banking needs.
Checking & savings accounts
- Look for a credit union that’s a member of a network, such as the CO-OP system of 30,000 fee-free ATMs and 5,000 shared branches. Find out which credit unions you’re eligible for at CUNA.org.
- Make sure it offers online and mobile account access.
- Check Consumer Reports’ list of the best rated credit unions to see if you’re eligible for membership.
- If you don’t qualify for any on that list, go to MyCreditUnion.gov and use the ‘CU Locator’ tool to comparison shop different credit unions.
Read more: 11 places to never use a debit card
Certificates of deposit (CDs)
- Start by comparing interest rates for certificates of deposit (CDs) at online banks and credit unions that were rated high by Consumer Reports.
- The best deals you can get will vary based on the amount you plan to deposit and the period of time you invest.
- Here’s more on what to know about CDs.
- Your best bet is a credit union, as Consumer Reports says credit unions most often offer the lowest rates.
- If you aren’t a member of one, find out which ones you’re eligible to join and then get prequalified for a loan before you start car shopping.
Credit cards and mortgages
- Start by comparing credit cards and mortgages at online banks. If you only consider what’s available to you at the bank where you have a checking account, you’re limiting your options and probably missing out on a better deal.
- Check out this guide to comparison shopping credit cards.
- Credit unions are also a good option for mortgages. Here’s more information.
- What you want to avoid is high fees and banks that just try to sell you their own investment services.
- Check out Vanguard, Fidelity, T. Rowe Price and USAA.
- See Clark’s advice on choosing the best investment firm for your needs.
Here’s how they work: You deposit money into an account that can be used as if it were a credit card (but without consumer protections) or like an ATM card to withdraw money (but without the protections of an ATM card).
Prepaid cards may boast a Visa or MasterCard logo — but they’re really just inferior versions of the real deal.
Some people like the idea of not being able to spend more money than you have, but the problem with that way of thinking is that prepaid cards typically fee you to death — which is just a big waste of your hard-earned cash.
The most important thing with prepaid cards is to read the terms and conditions closely to know what you’re getting into.
Clark’s favorite prepaid cards give you the ability to use the card with no fees, along with offering at least some basic consumer protections. Those protections can include restoring your funds if your card is lost or stolen or that your money is safe if there is fraudulent activity on the card.
- If you still write paper checks, you don’t have to get them from your bank! Consumer Reports found great deals at Costco and Walmart.
How to switch to a new bank
Switching banks can get tricky depending on how many accounts, cards, automatic payments and other things you have set up. Here are a few steps to take to make the process as easy as possible.
1. Open a new checking account
If you’re switching your primary banking services to a new bank, credit union or online bank, first open a checking account to start the process of moving things over. Most banks will allow you to do this online, and if not, then it’s a pretty quick process in person at your local branch. Opening the new account may require an initial deposit of $50 or less.
2. Switch your paycheck direct deposit
This process may take your bank some time, so it’s better to do it as soon as you open the new account.
3. Stop automatic bill payments
If you use automatic bill pay for any of your monthly bills, make sure to stop those immediately. Just make a note of when each bill is due each month, if you’re worried about forgetting to pay without the automatic bill pay doing it for you. There are two ways to do this:
- If you use “push” payments, which are payments you schedule to be made on certain dates each month, then you should be able to cancel those through your online account.
- If you use “pull” payments, which authorizes the company to pull the money out of your account each month, then you may have to contact the company directly to get that canceled.
Important note: If you are using “pull” (or automatic) payments that allow companies to access your checking or savings account, you need to cancel those immediately!
Also, when it comes to monthly payments and bill pay, Clark suggests not turning off the paper statement option. If you have the bills sent to you in the mail each month, you will always have records of everything in case a mistake is ever made.
4. Temporarily keep the old account open
Don’t close your old checking account until all payments and bills have been made — and have cleared your account.
Credit cards: If you open a new credit card and don’t use your old one anymore, do not close the account — that will ding your credit. Just let the account sit there after the balance is paid off.
5. Close the old account
Once all balances have been paid off, you can transfer the money from your old checking account to your new one, or get a check from the bank to deposit into your new account.