Which bank to use?

Consumer banking is a commodity service with little that distinguishes one from another. They all have FDIC insurance, ATMs, online bill payment, etc.

Which bank is best for you? Here are the guidelines I suggest:

1. Eliminate any that charge monthly service fees.

Most banks offer free checking and saving accounts, especially if you agree to direct deposit your paycheck or use their debit card.

2. The bank’s phone app is increasingly important.

Make sure your bank’s app has the features and usability you need. Besides checking your balance, getting notifications, and transferring money, apps now offer check deposits, which should eliminate the last reason to visit a physical location.

3. Other features such as expense tracking and setting up multiple savings accounts may have important value to you.

Some banks have Mint-like capabilities that integrate budgeting and expense tracking into their websites and apps. Also, I’m a proponent of “mental accounting” strategies to put savings for different purposes into differently named sub-accounts (like lay-away plans of years past) and some banks allow you to easily do this.

4. The bank branch and ATM network convenience don’t matter much anymore.

Even in the pre-COVID world, we rarely needed to step inside a bank branch and ATM use has become less important. Most of us spend little cash and when we need it, you can get cash back when swiping with your debit card at many retail stores.

5. Online banks offer higher rates on your savings.

Interest rates on savings accounts are low everywhere but do vary tremendously. Usually, the biggest banks (e.g., Citi, Bank of America, Wells Fargo) offer the lowest savings rates and the online banks (e.g., Ally, Capital One) offer the highest. You can get a sense of current online rates here.

6. Beware of Wells Fargo.

It seems they just can’t stop themselves from defrauding their customers as stories keep emerging about their horrible ethics and business practices.

7. Beware of banks’ marketing efforts.

Don’t be fooled when banks offer premium customer treatment or temporarily better savings rates in exchange for a deposit commitment. Remember, banks are commodities; the higher rates may not last and the special treatment may not be worth anything, other than an ego stroke. Banks know that once they have you as a customer, you’ll be reluctant to leave. (See my next point.)

8. Lastly, switching banks is a hassle so choose wisely.

Direct deposit and automated bill payment make it a challenge to switch banks so be deliberate in the choice you make.