The Best Type of Bank or Credit Union for Every Type of Person

A caucasian adult woman customer doing a transaction with a bank teller clerk working behind the bank counter in a retail bank.
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Banks come in many different flavors, and there are even more options now that online banks have expanded the choices no matter where you live. With so many services available from all kinds of banks and credit unions online, you no longer need to choose one that is in your neighborhood — although you can still find local branches if you want an in-person relationship — and you can have more than one bank to serve different needs. For example, you might choose a local bank for your everyday checking account but an online bank or credit union that offers higher interest rates for your emergency fund and short-term savings. Consider the following types of banks based on what is important to you.

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The Starter

When you’re just getting started in your career, it’s essential to find a bank or credit union with low fees and low minimums to open an account. Beware of overdraft fees and non-sufficient funds fees, especially if your balance tends to get low right before payday. These fees can balloon if you overdraw your account. Use the bank’s app to check your balance in real time, and sign up for direct deposit so your paychecks get into your account as quickly as possible. Watch out for other fees — make sure the bank has convenient fee-free ATMs and doesn’t charge a fee if your balance falls below a certain level. It can also help to find a bank that offers online budgeting tools to help you stretch your income.

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Personal Relationship

Even though you can now do almost all of your banking online — including depositing checks — some people feel more comfortable going into a bank branch. While many banks have been closing and consolidating their branches, you can still find a local bank or credit union where you can get in-person help. You may want a local branch, for example, if you deposit cash, want to be able to withdraw more than the ATM limits, or use notary services. Some banks and credit unions also offer financial advisors who can meet with you in person and help you make plans to reach your financial goals. Compare fees and interest rates. If you’re eligible for a local credit union, you may be able to get higher rates and in-person services.

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High-Interest Saver

Even though interest rates on savings are pretty low everywhere right now, you can usually get higher interest rates at an online bank or credit union. This can be perfect for an emergency fund or money you’re saving for goals in one or two years. Having a checking account at a local bank for your everyday expenses and a savings account at an online bank can be a good way to keep the money separate, so you don’t end up raiding your savings for your regular bills. It’s usually easy to transfer the money to your checking account when you need it. Or you can now do almost all of your banking with an online bank, including depositing checks, transferring money, paying bills and accessing fee-free ATMs. Some online banks also offer tools to help you budget and assess your progress toward your savings goals.

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The Investor

Some banks also have brokerages where you can invest in stocks and mutual funds; some brokerages also have banks, where you can keep the money you need to access in the shorter term. You can usually transfer money seamlessly from the bank account to the investing account, making it easy to build up your longer-term savings. In addition to checking on banking fees and access, also find out which types of investments are offered, whether you have a wide range of mutual fund choices, their expense ratios and other fees, and how much you’d have to pay in commissions to buy and sell stocks.

The All-in-One Solution

Some financial institutions do everything — banking, investments, insurance, credit cards, mortgages, car loans, retirement savings, and they may even provide free credit scores and offer car-buying services. It can be simple to keep all of your accounts in one place, making it easier to monitor your overall finances, and you may get discounts for having several types of accounts. But be sure to compare fees, interest rates, premiums and access for each type of service, just like you would with separate banks, brokerage firms or insurance companies.

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About the Author

Kimberly Lankford has been a financial journalist for more than 20 years. As the “Ask Kim” columnist at Kiplinger’s Personal Finance Magazine, she received hundreds of reader questions every month about insurance, taxes, retirement planning and other personal finance issues. Her financial articles have also appeared in the Washington Post, U.S. News & World Report, AARP Magazine, Boston Globe, PBS Next Avenue, Bloomberg Wealth Manager and Military Officer Magazine, and her syndicated columns were published regularly in the Chicago Tribune, Denver Post, Baltimore Sun and other papers.

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