Choosing the right bank can be tricky, especially if you aren’t quite sure what to look for, or maybe if you haven’t had to make any big purchases that involve loans — like a home or car. But there’s more to consider when picking a bank than just whether or not there’s a branch down the road from you.
There are several factors to take in to account when deciding which bank is best for you. 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 — and they’re convenient, with more than 17,000 branches and more than 80,000 ATMs that are fee-free. Plus, they offer easy-to-use online access and other digital platforms.
BUT, here’s the part you may not realize: all four ‘mega banks’ scored in the bottom fifth of a recent Consumer Reports survey, which rated more than 74,000 banks and credit unions.
Read more: 11 fees you should never pay
Survey says: Bigger is NOT better
According to Consumer Reports, it’s not that customers of the big banks weren’t satisfied in general, but 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 new bank
The good news is that if you aren’t 100% satisfied with your bank, choosing the best bank that fits your needs just got a lot easier! (And if you are satisfied with your bank, but haven’t shopped around, how do you know you’re 100% satisfied?)
If you have everything in one place — let’s say your checking account, savings account, car loan and home loan — then you may get some added benefits or fee discounts from your bank. 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.
Comparison shop for each service
If you shop around for the best deal at different financial institutions, there’s a good chance you’ll save some money. According to the CR survey, 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.’
Bottom line: You don’t need all your services from one banking institution. Do some research and find the best deal 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: 9 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 on 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).
Pre-paid cards may boast a Visa or MasterCard logo—or an American Express logo, to a lesser extent—but they’re really just inferior facsimiles of the real deal. These cards are loved by millennials because you can’t spend more money than you have. So they’re a way to store money and pay for things without having a traditional bank account. But they typically fee you to death!
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 money, then you may have to contact the company directly to get that canceled.
Important note: If you are using ‘pull’ payments that allow companies to access your bank account, that’s a bad idea. Consumer Reports suggests not setting those up again in the future, to ensure you are the only one who has control of your account.
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.