10 Things to Consider When Choosing a Bank

The first thing you need to do when looking for a new bank is to sit down with as many statements from your current bank as you can find. If you bank online, this couldn't be simpler. Then, go through them month by month, looking at your expenses and the fees your bank charges you.

It's important to be honest about your behavior. If you're changing banks as part of a personal program to improve your finances, include that, too -- but now isn't the time for unblemished optimism. Your bank should fit your needs, not the other way around.

Are there fees or policies that annoy you? Some big banks play tricks, like stacking payments, so that you end up paying more in fees than you would elsewhere. Do you pay for things like online banking or bill pay that you don't think you should have to pay for?

Are the services you pay for now coming at a fair price? Are there conveniences you're willing to give up for services that would fit your needs better? You may be able to find a compromise elsewhere, but you won't know for sure until you've looked at what you use on a regular basis.

Once you've made a plan for your financial needs, it's time to think about your bank's location. Do you spend time all over town or traveling? Most of us these days use direct deposit, checks and online payments to keep our day-to-day finances in order. How often do you currently visit your bank's physical location?

Likewise, nobody likes paying extra fees at the ATM. They really stack up, as you'll see when you comb through your statements. If you find yourself pulling cash often -- and handing over money for the privilege -- you'll want a bank with a large ATM network so you can avoid paying those fees.

Most grocery chains have agreements with larger banks, and some even have in-store branches for smaller local banks or credit unions. This can be convenient for one-stop shopping and banking, but only if the hours are a good fit. Keep your eyes open next time you're shopping, and look for branches between home and work. You could be saving time and money by combining trips.

Just remember, convenience is often something you pay for. Larger, more accessible banks can mean larger fees and less competitive interest rates. Don't let location substitute for your research into all the areas we're talking about: It's important, but not the only thing that matters. A lot of us can let the convenience of location -- or smart marketing, billboards and ads -- do that work for us. Banks count on that.

The average yearly price of a checking account at a bank can be as high as $200. For each bank that you're considering, take a good look at its fee schedule and think about what you're likely to spend. On the other hand, remember to include interest rates in your calculations. A higher-fee bank may offer competitive interest rates, so if you're also planning to save with that bank, you could offset the costs considerably. Don't let an unattractive fee schedule make the decision for you -- it's not the whole story!

All banks assess maintenance fees, so make sure they're competitive for your kind of account. "Free" checking can get rid of the maintenance fee, among others, but the key is the specific conditions, which change from account to account.

As far as ATM fees, just keep in mind your actual behavior. Some younger banks, especially online banks, offer rebates on "foreign ATM" fees. If you travel a lot and need cash on a regular basis, you should definitely rate banks higher that provide this convenience in one way or another.

Returned checks and insufficient funds (NSF) fees are a great way for banks to make money, because they're counting on those mistakes and oversights that happen to us all from time to time. Don't plan to pay these, but do look into overdraft protection programs at each bank you're researching.

All bank ads, brochures and materials are designed to present their services in the best light. Don't let yourself be overly attracted to an institution merely because of the way it talks about its services: Each bank offers selections from the same range of services -- some more, some less -- even if they go by many names. What matters is what you need, not what they think you want.

Make your list of desired features and services before heading to a bank's Web site so that you can be sure you're not being swayed by their persuasive presentations. Banks are constantly devising new products and putting new spins on existing products, so it's easy to be overwhelmed when they're telling you how important the new features are. Only you can say what's necessary for your household, and only you can honestly know what you're likely to use enough to make it count.

Internet-only banks are a fascinating new trend. Since they don't have to keep up physical branches -- those beautiful lobbies, the friendly full-time tellers, building rental, maintenance and upkeep -- they pass those savings on to you in the form of lower interest rates and instant updates.

On the other hand, depositing checks is a real drag. Scanning or mailing them in and waiting for your deposits to clear can really slow you down. But if your income is entirely direct-deposit based, that won't be such a hindrance.

A lot of us find the concept of an online bank to be a little scary. You try not to be superstitious, but hearing about identity theft and scams can make the difference in your decision. But don't let fear take away your shot at those exciting interest rates: Arm yourself with information. Make sure that the bank is FDIC/NCUA insured, and find out about the bank's history.

It's easy to link your internet accounts to services like PayPal, and even to accounts at other banks, so you can have the best of both worlds. While Internet-only banks are still in their infancy, many experts swear by them. And as they grow and continue to innovate, the landscape will only become more inviting.

If you've never experienced banking with a credit union, it can be a little bewildering. They use different words for everything, and your relationship as a customer is very different from that you may be used to with a bank. But credit unions are a very attractive alternative, once you get the basics.

A bank is run by a board of directors who answer to its investors, and whose only job is to create profit for those investors. Every fee, every product and service, and every procedure is about putting money into those investors' pockets. A bank is a business, like any other.

With a credit union, those investors are the members themselves. Opening an account at a credit union means becoming a part owner of the credit union. It's called a "share account," and it works like a savings account and represents your voice in the company.

Credit unions are usually smaller, regional and community-oriented, so by joining, you're also taking part in your local economy. And since they're not-for-profit institutions, credit unions share any year-end profits with their members through dividends.

On the other hand, they don't always offer a bank's conveniences. Some don't have very extensive ATM networks, so you could find yourself paying a lot of extra fees. They don't always invest in the newest online banking systems because of the focus on savings and profit-sharing goals, so if that's a premium service for you, make sure to investigate the online situation fully before choosing a credit union.

As important as your past and current behavior should be in choosing a bank, it's also good to keep your future plans in mind. Banks make their money on loans and mortgages, which means there are many things to consider to ensure you're getting the best deal. Of course, you can always split your accounts across multiple banks -- and doing so could increase your wealth -- but most of us would prefer to form a relationship with the best of our options. You want to find a bank you can trust, and that includes trusting it to meet your future needs.

If you know that you'll be looking at a major purchase or expenditure in the next five years or so, and you'd like to finance through your everyday bank or credit union -- which sometimes means financial benefits, as a trusted customer -- you'll need to factor loan rates into your decision. If your needs are immediate, it's worth taking the time to look for special deals: You can lock in those rates now.

If you're more interested in making your money work for you right now, you should definitely consider credit unions and online banks. Their rates are usually much better than those at local banks. Remember to compare annual percentage yields (APY) in this category as opposed to annual percentage rates (APR), since different institutions add your interest to the capital at different frequencies: The APY rate is a summation of these practices, so you know you're comparing apples to apples.

Financial institutions aren't going to advertise changes to their policies, so it's important to read the fine print on any paperwork you get from your bank. Banks keep investors happy by finding new ways to separate you from your money, which means you need to know what your bank's policies are and when they change.

It's essential to keep an eye on your balance to make sure you aren't paying extra fees. Phone or online balance checks are a good way to stay on top of your budget and make sure you're not subject to NSF or overdraft fees. By linking your savings and checking accounts, you can avoid these fees and keep your balance in checking as low as possible. That means you're earning a better rate on that money through your savings account.

Today's financial environment means mergers, buyouts and other corporate changes. It may seem like these things don't affect you, but you might be surprised by changes happening right under your nose! If a bigger bank buys your bank, you could be subject to its fees and rates -- and chances are, the new entity is going to choose the more profitable solution every time.

Comparing rates, fees and your overall happiness with your bank is something you should be doing every year or two. You might be surprised by how much things have changed! While loyalty is important and can pay off when it's time to get a loan, the bottom line is your satisfaction.

Most of us are willing to eliminate hassle by choosing the best bank for our needs, making compromises if we must and getting back to our lives. But if you enjoy playing with money and don't mind putting in the effort, there are some less typical options you may consider beyond converting to online banking.

For example, some high rollers use their stock brokerage as their main bank. You can use a VISA debit card at the ATM, write checks on your account and sometimes even borrow against your holdings. If you use your money market account for checking, you can get much higher interest than with a regular checking or savings account. Brokerages will be happy to tell you all the products and financial solutions they can offer you: It's entirely possible this could be a real solution.

Another option is splitting your accounts across several banks. If you like the features of a big-bank checking account but aren't satisfied with its savings rates, you can always take that money to a credit union or online bank. Do you like the rates on CDs or other savings products, but find other aspects of an institution lacking? There's no reason you can't have both.

And don't forget regional institutions outside your local area! Out-of-state small banks are easy to research and often just as convenient to use as a bank that's close by.

We've talked about various methods banks have created to sell you on their rates, because they know that research and being honest about finances are two things most of us hate to do. But just a little comparison shopping, and a focus on your personal needs and behavior, can go a long way in making sure that you've found a bank that's the perfect fit. Like any other service or purchase, it comes down to your priorities.

Some banks offer free checking when you use direct deposit or limit your branch visits, but typically, the account is "free" only when you agree to a particular minimum balance, which could range from $1,500 to $4,000, depending on the bank.

Of course, you really shouldn't keep too much money in checking anyway -- it's just sitting there not earning interest -- so, again, you can balance the fees against the rates you could be earning on that money. Your checking account won't be "free," necessarily, but it could be worth the extra fees.

Banks spend a lot on advertising and finding new ways to say the same old things, and for many of us, that's the source of our information. But with just a little digging, you can see beyond the claims they make and find the perfect solution for your banking needs.