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Whether you recently moved or are simply looking for a change, choosing a new bank or credit union is a big decision and the options can be overwhelming. Fortunately, a few tips can help you to choose what best fits your individual needs.
The difference between banks and credit unions
The main difference between banks and credit unions is this: banks are for-profit companies while credit unions are non-profit membership organizations.
How does this difference affect you in practical terms?
Banks often offer more branches, and you don’t need to qualify for membership to join. To qualify for a credit union, you may need to live in a specific community, work for a specific company, go to a certain school or church, etc. Credit unions generally offer lower maintenance fees and higher interest rates on savings. Banks generally have more branch locations and ATMs, better rewards programs, and more recent technology. Of course, each credit union and bank is different so you’ll want to investigate each option individually.
Basic tips for selecting a new bank or credit union
Know what you need. Start with the basics and ask yourself the following questions. Having your answers in mind will make evaluating and comparing banks or credit unions much easier.
- Is physical location important to you or will you complete most of your transactions online?
- Will you keep a large amount of funds in your account at all times?
- Do you expect perks for direct deposits?
- Do you need a checking account only or would you like a savings account, too?
- Would you like to bank at a place that can also issue a loan or finance a mortgage?
Shop around. Don’t rush this decision or simply select the bank with the biggest sign-up incentive. Take your time when choosing a bank or credit union. Ask friends and family members where they bank and if they are satisfied with the service they receive. Inquire about the specific pros and cons of their institution. Once you have a few options in mind, check BBB.org to read reviews and complaints.
Think about in-person and online banking. If you prefer in-person banking, you’ll need to find a bank or credit union that has convenient locations near where you work, live, and shop. Then, find out if the hours of operation fit your schedule. If you prefer to do most of your banking online, inquire about online bill pay and transfers. Make sure all the online banking options you need are available and easy to use.
Ask about account options, interest, and fees. When you visit a bank or credit union for the first time, ask what kinds of accounts are available and any associated fees. Often, opening an account is free but some banks require consumers to pay monthly maintenance fees. It is also important to inquire about overdraft protection and overdraft fees. If you plan on using direct deposit, find out if the institution offers any incentives for doing so. If you are a regular ATM user, ask whether you will be charged any fees when you use an ATM outside of that ATM network.
Most banks and credit unions also offer accounts that accrue interest over time as well. Compare the percentages offered for different kinds of accounts at each to see which offers the best interest rates.
Understand minimum balance requirements. Banks or credit unions often offer accounts that have specific minimum balance requirements. If you choose this kind of account, keep in mind that there are penalties if your account balance dips below the minimum. For example, if the minimum balance requirement is $500 and your balance drops to $499 for one day, some banks or credit unions will charge a fee for that month. Others base their fees on a monthly balance average. If you don’t keep a lot of money in the bank, an account with a high minimum balance requirement will not be a good option for you.
Make sure the financial institution is insured. No matter how great a bank or credit union seems, if it isn’t insured, your money is not protected if it fails. In the United States, the Federal Deposit Insurance Corporation protects consumers’ money by insuring $250,000 per depositor, per insured bank. Credit unions receive similar coverage through the National Credit Union Association. In Canada, the Canadian Deposit Insurance Corporation insures up to $100,000 per bank depositor, and provincial agencies do the same for credit union depositors. Make sure the bank or credit union you choose is a member of one of these associations.
Researching banking institutions takes time, but finding a bank or credit union that fits your needs is worth the effort. Your bank account should help you reach your financial goals. As you make your decision, remember to check BBB.org for BBB Business Profiles, complaint histories, customer reviews, and more.
Thanks to the BBBs of Eastern Oklahoma, Chicago, New York City, and Boston for their contributions to this article.