Overdraft fees and difficulty resolving disputes, opening accounts and accessing money top the list of complaints that the Consumer Financial Protection Bureau regularly gets about banks. Fortunately, there are a growing number of alternatives to the traditional big banks — some offering higher returns, better service and peace of mind.
If you are shopping for a better bank or considering doing so, the following tips will aid you. Once you’re ready to make a jump, be sure to check out “How to Switch Banks in 5 Steps.”
1. Shop interest rates
If you’ve got money sitting in a savings account, certificate of deposit (CD) or money market account, you’d be remiss not to shop for the best interest rate.
Even though the national average return on savings accounts is just a 0.06% annual percentage yield (APY), there’s a substantial spread among different institutions. And you can even find interest-earning checking accounts.
One place to compare interest rates on CDs and checking and savings accounts: the Money Talks News Solutions Center.
2. Look into online banking
If you peruse a list of savings account offerings, you’ll notice that some of the highest interest rates are paid by institutions that are unfamiliar. That’s because there’s a growing number of newer banks that do business solely online. They don’t need to maintain a network of brick-and-mortar branches, so their expenses are lower, which can mean they pay higher interest rates and charge lower fees.
One of our online favorites is CIT Bank which, as of this writing, is paying 0.95% APY on savings accounts. That’s far more than most big banks offer.
One caveat: Online banks generally don’t have their own ATMs. They rely on agreements with banking networks. So, if you think you will need ATMs to access your account with any regularity, check for an online bank’s ATM policies and costs before switching banks. Look for one that waives or reimburses you for any ATM fees you might incur.
3. Explore credit unions
Credit unions may offer the personal service you crave with the lower fees and higher interest rates you need. Also, they have a reputation for focusing on fair lending and investing in communities.
Just don’t assume you’re getting a good deal without comparing accounts you qualify for at a variety of institutions. For more pointers, check out “How to Pick the Best Credit Union for You.”
4. Check into community banks
Community banks are generally owned and operated locally, not owned by mega-bank holding companies. Many community banks pride themselves on keeping fees low and on making loans within the local community — but not all of them do, so check.
Use the Independent Community Bankers of America’s “Community Bank Locator” tool to find community banks near you.
5. Weigh convenience
If you value face-to-face contact with a bank, you’ll want to find a credit union or bank with many convenient branches near your home and workplace.
Start your research by noticing which banks you see in the neighborhoods you frequent. Go to the website of each bank you’re considering and find its branches nearest you. Pay attention to hours and ATM locations.
6. Make sure the new institution is insured
Before switching to a new credit union or bank, confirm that it is insured by the Federal Deposit Insurance Corp.
The FDIC is an independent federal government agency that ensures if a member banking institution fails, each depositor can recover up to $250,000.
Use the FDIC’s “BankFind” tool to check on institutions you are considering.
7. Research ATM networks and costs
ATMs are a big part of the banking experience for many consumers. You’ll probably want your new bank or credit union to have lots of ATMs that cost you nothing to use and are in safe, convenient locations.
If so, visit each institution’s website to find its list or map of in-network ATMs. Visit the locations you’ll use most to be sure you’ll feel comfortable there.
Also, learn about the ATM fees, both for in-network and out-of-network ATMs. Read the fine print on the bank’s site, brochure or contract to be sure you won’t be hit with expensive fees after you’ve chosen a new bank.
8. Decide if free online bill payment matters
If you love the convenience of paying bills online, make sure the bank you are considering offers an online bill-paying service and check to see if the bank imposes a fee for using the service.
9. Learn about the mobile app
The ability to check your balances and make deposits from your smartphone makes mobile banking one of life’s real conveniences. Great mobile apps are expensive features for banks to develop, which means that the biggest banks have some of the best mobile apps.
NerdWallet has rated the mobile banking services of a variety of institutions. NerdWallet favors mobile banking from:
- TIAA Bank
- Capital One
- Alliant Credit Union
10. Ask your friends
vSome bank features are harder to research. My satisfaction with Wells Fargo, for example, had much to do with the sophistication of its online banking interface. But although I found numerous recommendations for online banks, I found nothing about their online interfaces.
So, ask your friends what they most enjoy — or dislike — about the banking institutions they currently use.