Factors to Consider Before Opening a New Bank Account

“Before making any financial move, it’s essential to understand the Factors to Consider Before Opening a New Bank Account—from fees and features to accessibility and customer service.”

Choosing a new bank is no small decision — your financial health depends on it. Whether you’re frustrated with your current institution, moving to a new area, or simply want better services, picking the right bank can shape your financial future for years to come. From avoiding unnecessary fees to maximizing your money’s growth, there are plenty of factors to weigh before making the switch. This article will guide you step by step through what to look for when choosing a new bank, so you can bank smarter, stress less, and feel confident about where your money is kept.

The three most important factors when choosing a bank for checking and savings accounts are the type of bank, the interest rates it pays, the fees it charges, and the extra features it offers. Different banks offer widely different levels of service, charge different levels of fees, and will pay you significantly different amounts of interest on your money. This means that finding the best bank or the best online bank for you is rarely a one-off process. You may have to choose a new bank several times throughout your lifetime, too, as your financial and investment goals evolve. The good news is that there is no limit to the number of bank accounts you can hold, nor how frequently you switch.

Key Takeaways

Three main types of financial institutions can reasonably be referred to as a banks: traditional brick-and-mortar banks, online banks, and credit unions.
Take a look beyond all the marketing hype, and you’ll see that most bank accounts can be distinguished by the fees they charge and the interest rates they pay.
Peace of mind is arguably the most important service offered by any bank and should be an important part of your choice.
As you evaluate your bank account, understand that you can have accounts at different banks at different times.
Also, in many cases, it may be free to very low cost to close an account if you are no longer happy with your bank.

Table of Contents

Types of Banks

The first and most fundamental factor in choosing a bank is the type of institution that is right for you. There are at least three distinct types of financial institutions that can reasonably be referred to as a bank, each of them offering a unique set of advantages and disadvantages.

Traditional Banks

Traditional banks are what most people picture when they think of a bank. These institutions have been around for generations and have built their reputation through a widespread network of brick-and-mortar branches. Customers can visit these physical locations to carry out a wide range of banking activities, from opening new accounts and applying for loans to speaking directly with a banker for financial advice. Traditional banks also provide ATM services for cash withdrawals and deposits, serving not only their own customers but also clients from other banking networks.

In addition to their long-standing branch presence, many traditional banks have adopted modern technology to stay competitive in today’s fast-paced world. They now offer convenient online and mobile banking services that allow customers to pay bills, transfer money, and even deposit checks remotely, saving a trip to the branch. These digital tools have greatly expanded the reach of traditional banks, making it easier for people to manage their finances anytime and anywhere.

Despite their history and trusted name, however, there are fewer reasons today to stick with a traditional bank compared to exploring newer banking options. Online banks and credit unions often stand out by providing lower fees, better interest rates, and more customer-focused features. For many people, this means a traditional bank may no longer be the automatic choice it once was. Before deciding, it’s smart to weigh the advantages and disadvantages of traditional banks against other alternatives to make sure you’re getting the best value for your money.

Online Banks

Online banks were once a rarity on the financial landscape, with relatively few options available just a couple of decades ago. However, their popularity has soared in recent years, making them powerful competitors to traditional banks. The key advantage of online banks lies in their streamlined structure: since they operate with few or no physical branches, their overhead costs are dramatically lower than those of brick-and-mortar banks. As a result, online banks can typically pass those savings on to their customers in the form of reduced fees, higher interest rates on deposits, and better loan terms.

Yet, for some customers, the lack of in-person service at an online bank can be a sticking point. When you cannot walk into a branch to sit down with a banker, resolving complex problems can feel more challenging. The online banking industry is well aware of this concern, which is why many of the best online banks today offer robust customer service options — including 24/7 live chat, dedicated phone lines, and even video conferencing with banking representatives. Still, it is important to understand that if face-to-face service is a top priority, a purely online bank may not fully meet your expectations.

Credit Unions

Credit unions are often overlooked when people think about where to keep their money, yet they offer several valuable advantages that make them a compelling alternative to both traditional banks and online banks.

At their core, credit unions are not-for-profit financial cooperatives. Unlike traditional banks, which exist to generate profits for shareholders, credit unions are owned by their members. This structure allows them to return earnings to their members in the form of lower fees, higher savings rates, and better loan terms. Essentially, the profits stay within the membership rather than going to outside investors, which helps foster a sense of shared benefit and trust.

Another strong point in favor of credit unions is their commitment to community involvement. Many credit unions maintain deep ties with the neighborhoods they serve, investing in local projects, supporting small businesses, and offering financial education programs. If you value a banking partner that reinvests in your local economy and supports community initiatives, a credit union may be the natural fit for you.

Fees and Interest Rates

The next factor to consider in choosing where to bank is an institution’s fees and the interest rates it offers. Most people will have two basic accounts: a checking account and a savings account. The features you need for each type of account will vary, and very often it makes sense to have these accounts at different institutions.

Banking Fees

Banking fees are one of the most important factors to consider when choosing where to open a checking account. Most banks charge a monthly maintenance fee to keep your account active, but the amount of this fee can vary significantly from one bank to another. Fortunately, many banks will waive or reduce these fees if you meet specific requirements, such as maintaining a minimum balance or setting up a recurring direct deposit of your paycheck.

To avoid being surprised by unexpected charges, it’s critical to fully understand a bank’s entire fee schedule before opening an account. Always ask for a complete list of potential fees, and be sure to read the fine print so you know exactly what you’re agreeing to. Here are some common fees to watch out for:

Monthly maintenance fees: Regular charges just for having an account open.
Overdraft fees: Fees charged when you spend more than what’s available in your account.
Statement fees: Charges for receiving printed statements rather than electronic ones.
Stop payment fees: Fees to cancel a check you’ve written before it’s cashed.
Returned check fees: Charges when a check you deposit bounces due to insufficient funds.
Wire transfer fees: Costs associated with sending or receiving wired funds.
Cashier’s check fees: Charges for purchasing a cashier’s check.
Certified check fees: Fees for getting a check certified by the bank.
Out-of-network ATM fees: Charges for withdrawing money from ATMs outside your bank’s network.

In many cases, these fees are the biggest difference between otherwise similar checking accounts. All else being equal, it’s smart to choose the account with the lowest possible fees to keep more of your hard-earned money. By asking detailed questions up front, you can prevent costly surprises later and make sure your checking account truly works in your favor.

Interest Rates

For your savings account, look for a different set of features. You shouldn’t need to access a savings account as frequently as you do a checking account, so it’s unlikely that you will need app or online banking services. As long as you don’t make frequent withdrawals, most savings accounts don’t come with high fees.

Instead, the primary way that these deposit accounts differ is in the interest rates they pay. These can vary widely, and the best rates are often those offered by credit unions or online banks. Shop around to find the best interest rate for your savings.

Extra Features

The two factors we’ve considered so far—the type of institution you choose and the amount it will cost you in fees or lost interest—are the most fundamental aspects of choosing a bank. However, most banks will also offer a range of other services, discounts, or features that may be crucial for you.

Because everyone’s needs are different, take some time to think about how you use the accounts you currently have and where you are losing money in fees or time. Then look for a bank that’s a better fit. Important factors might include:

Online and app-based banking. Most banks now offer these options. If you are using your account a lot—particularly for setting up new payments or managing standing orders—a full-featured online service can save you a lot of time.
Local branches and ATMs. Even if you deal with your bank primarily online, there may still be times when it’s easier to visit a branch. For many people, having a local bank branch—at least for their checking account—is a must. Similarly, a network of ATM machines may be important to you—say, if you travel frequently and need ready access to cash while on the road.
Security. Though most banks are insured against loss, they still vary when it comes to the level of security they offer for online services. A quick scan of the news to see which banks have recently experienced security breaches may help you rule out a bank in this regard.

This last point is related to another—that ultimately, the bank you choose should be one you trust. Many people still make their bank decision based on the company that their parents bank with, or merely because they trust the name and reputation of a large national bank. There is nothing wrong with that—peace of mind is arguably the most important service offered by any bank and should be part of your decision-making process.

The Bottom Line

At the end of the day, a good bank is one that gives you convenient and reliable access to your money, charges fair and transparent fees, offers competitive interest rates, provides secure and user-friendly online and mobile banking tools, delivers excellent customer service, and is trustworthy with your financial assets.

To choose the right banking partner, it’s helpful to make a checklist of these qualities and rank your options against them. Compare banks and credit unions side by side to see which institution meets your needs best. Consider things like branch accessibility, fee structures, savings rates, and how responsive their support teams are.

And remember, banking is not a one-time decision set in stone. If your first choice doesn’t work out as well as you expected, you can always switch to another bank or even open a second account to explore other benefits. Being proactive and flexible gives you the power to find the perfect banking fit for your lifestyle, now and in the future.