Your first bank account could depend more on your parents than anything else. They likely helped you decide where to open your account, and you may have stuck with it for years.
You may have switched bank accounts later when you moved out, went to college, or got a job. Or, maybe you’ve stuck with the same bank account your entire life to date.
Whether you’re planning to open your first solo bank account or currently use a bank account that’s behind the times and keeps charging you fees (ugh), it may be time to switch.
We think you should focus on three areas when you’re trying to figure out how to choose bank account: the convenience, the bank account’s features, and your overall cost of banking.
As a core component of your personal finances, your primary bank account should be convenient.
While it may be convenient to choose a bank that you drive by every day, digital-only banks can be very convenient as well (no parking lot drama! no lines to wait in!). Most offer a debit card, have a robust mobile app, are part of a no-fee ATM network, and pass savings on to customers in the form of fewer or lower fees and a higher Annual Percentage Yield (APY).
Whether you go brick-and-mortar or digital-only, some people prefer to use one bank for all their accounts: checking, savings, credit cards, and loans. While this arrangement can be convenient, weigh the pros and cons of sticking with one financial institution rather than shopping around and finding the best rates and terms for different financial products.
Also, consider the bank account’s customer service department. Having access to live customer service seven days a week (that isn’t a pain to call) can be an important distinguishing factor.
Features and benefits
You may want look at the specific bank account and savings account features before choosing an institution. After all, convenience and customer service can’t make up for features that don’t serve your needs.
First, any bank account you select should have FDIC insurance*—it’s a government-backed guarantee that insures up to $250,000 in total deposits in case the bank fails.
Now, look at the features the bank account offers. For example, some accounts allow you to deposit checks using the mobile app or send checks to people or companies with a bill pay feature. You may even get access to money management tools in the mobile app that don’t cost you a thing.
The Varo Bank Account and Varo Savings Account come with two automated tools that make it easy to increase your savings—Save Your Change and Save Your Pay. The former rounds up transactions to the nearest dollar and automatically transfers that amount to your savings accounts. The latter lets you transfer a percentage of each direct deposits into the savings account. Varo customers can also use in-app features to aggregate outside accounts to get a full view of all their money accounts inside and outside of Varo.
Rates and fees
Call us crazy, but we don’t think your bank account should slowly drain your savings! Quite the opposite, you should be able to find an account that securely stores your money and pays you interest.
There are two sides to this coin, the bank account’s fees and the savings account’s interest rate.
No-fee accounts let you build your savings and spend your money without worrying about monthly maintenance, ATM, or foreign transaction fees. Also, you’ll want to look closely at the bank account’s overdraft policy to make sure you don’t incur a surprise fee. Also check out the APY on the savings account and ideally get one with a great rate.
Making the switch
Once you find a bank account that’s convenient and an account with the features and fees you want, making the switch can be relatively easy.
- Open your new account first. You may need to fund the account, which you can often do with an electronic transfer from your old account or by depositing a check.
- If you use automatic payments with your old account, make sure you set them up on your new account so you don’t accidentally miss a payment. Also, update your banking information with your employer if you have direct deposit.
- Then, call or visit your old bank to close the account. You might receive a check for your remaining balance, which you can then deposit in your new account. Or, you may be able to electronically transfer your money before closing the account.
Louis DeNicola is a freelance personal finance writer and credit enthusiast. You can find him on Twitter @is_lou.