There is no single "best" bank—it depends on how you move money
The bank that works for you depends on what you actually do with your account. Someone who keeps a $50,000 balance and never visits a branch needs different things than someone who deposits checks weekly and needs to talk to a person. Before you compare banks, write down: how many times a month you deposit money, whether you need a physical branch nearby, what balance you typically keep, whether you use ATMs outside your bank's network, and whether you want your checking and savings in one place or separate.
Banks make money on different parts of your account. Some charge monthly fees but pay interest on savings. Others charge nothing but pay almost no interest. Some charge you for using another bank's ATM; others reimburse those fees. The "best" account is the one where the fees you actually pay are lowest and the interest you actually earn is highest.
Key Takeaways
- Monthly fees, ATM access, and interest rates vary widely between banks, so the cheapest account for one person may cost another person more.
- Banks that charge no monthly fee often require a minimum balance or direct deposit, so read the conditions before opening.
- Interest rates on savings accounts change monthly and are not locked in, so a high rate today may drop next month.
- Online banks typically offer higher savings rates and lower fees than brick-and-mortar banks, but you cannot deposit cash or speak to someone in person.
- Combining checking and savings at the same bank can lower fees, but splitting them between banks may earn you higher interest on savings.
What actually costs you money at a checking account
Monthly maintenance fees range from zero to $15 or more, but most banks waive them if you meet a condition. Common conditions are: keeping a minimum balance (often $500 to $2,500), setting up direct deposit, or maintaining a certain number of debit card transactions per month. If you do not meet the condition, you pay the fee every month. Read the fine print—some banks count only payroll direct deposits, not transfers from other accounts.
Overdraft fees hit when you spend more than you have. Banks charge $25 to $40 per overdraft, and some charge multiple times per day if you make several transactions while overdrawn. Some banks offer overdraft protection, which links your checking to savings and transfers money automatically—usually for a smaller fee or none at all. Others let you opt out of overdraft coverage entirely, which means transactions straightforward decline instead of charging a fee.
Out-of-network ATM fees are $2 to $3 per withdrawal if you use an ATM that is not your bank's. If you withdraw cash twice a week at a convenience store ATM, that is $16 a month. Banks that reimburse out-of-network fees (usually up to a limit) eliminate this cost. Online banks often belong to ATM networks with thousands of machines, so you have access without fees.
How savings account interest actually works
Banks publish an Annual Percentage Yield (APY), which is the rate you earn on your balance over one year. The rate changes whenever the Federal Reserve changes its benchmark rate, which happens several times a year. A savings account earning 4.5% APY today might earn 3.8% next month. The rate is not locked in. Online banks and credit unions typically offer higher APY than traditional banks because they have lower overhead costs.
Interest compounds daily or monthly depending on the bank. Daily compounding means you earn interest on yesterday's interest, which adds up slightly faster than monthly compounding. On a $10,000 balance at 4.5% APY, the difference between daily and monthly compounding is roughly $5 per year—not nothing, but not the main factor.
Some banks require a minimum balance to earn interest on savings, or they pay a lower rate if your balance drops below a threshold. Others have no minimum. If you keep less than $1,000 in savings, a bank with no minimum and a high APY is better than one with a $2,500 minimum and a slightly higher rate.
Comparing online banks versus brick-and-mortar banks
Online banks (like Ally, Marcus, or Discover) have no physical branches. You deposit checks by photographing them with your phone, you cannot deposit cash, and you speak to customer service by phone or chat, not in person. In exchange, they pay higher interest on savings (often 4% to 5% APY) and charge lower or no monthly fees. They are best if you rarely need cash, do not deposit checks often, and want the highest savings rate.
Traditional banks (like Chase, Bank of America, Wells Fargo) have branches and ATMs everywhere. You can deposit cash, speak to someone face-to-face, and use a debit card at millions of ATMs. They typically pay lower interest on savings (often 0.01% to 1% APY) and charge monthly fees unless you meet their conditions. They are best if you need physical access, deposit cash regularly, or want everything in one place.
Credit unions are member-owned and often offer rates between online banks and traditional banks, with lower fees than big banks. You need to be a member (usually by living in a certain area, working for a certain employer, or joining an affinity group). Credit unions are smaller, so ATM networks are more limited, but many participate in shared branching networks that let you use other credit unions' branches.
What to look at when you compare accounts side by side
| Factor | What to Check | Why It Matters |
|---|---|---|
| Monthly fee | The fee amount and what waives it (direct deposit, minimum balance, debit card use) | If you do not meet the waiver condition, you pay this every month |
| Minimum balance | The amount required to avoid fees or earn interest | If your balance drops below it, you may pay a fee or earn zero interest |
| Overdraft policy | Overdraft fee amount, whether overdraft protection is available, whether you can opt out | Overdraft fees add up fast; opting out prevents accidental charges |
| ATM access | Number of ATMs in your bank's network, whether out-of-network fees are reimbursed | If you use ATMs frequently outside the network, reimbursement saves money |
| Savings APY | Current rate, whether it is fixed or variable, minimum balance for the rate | Rates change monthly; online banks usually pay more than traditional banks |
| Check deposits | Whether you can deposit checks by phone, how long they take to clear | Mobile check deposit is faster and more convenient than mailing or visiting a branch |
Combining checking and savings versus splitting them
Keeping both accounts at the same bank is simpler: one login, one statement, one customer service number. Transfers between your own accounts are when ready. Many banks offer a small discount on fees if you link checking and savings. This works well if the bank offers reasonable rates on both and you do not want to manage multiple logins.
Splitting checking and savings between banks can earn you more interest. You might keep checking at a traditional bank for convenience (branches, cash deposits, ATM access) and savings at an online bank that pays 4.5% APY instead of 0.5%. The tradeoff is managing two logins and waiting one to three business days for transfers between banks. This makes sense if the interest difference is meaningful to you—on a $20,000 savings balance, the difference between 0.5% and 4.5% is roughly $80 per month.
A middle ground is opening both accounts at an online bank that offers both checking and savings with no monthly fees. You get one login and higher interest rates than traditional banks, but you lose physical branch access and cannot deposit cash.
Questions to ask before you open an account
Call or visit the bank's website and confirm: (1) What is the current APY on savings, and is it variable or fixed? (2) What monthly fee applies to checking, and what waives it? (3) If I do not meet the waiver condition, can I close the account without penalty? (4) Does the bank reimburse out-of-network ATM fees, and if so, how many per month? (5) Can I deposit checks by phone, and how long do they take to clear? (6) What is the overdraft fee, and can I opt out of overdraft coverage?
Do not open an account based on a promotional offer alone. Banks sometimes offer $100 to $300 bonuses for opening checking and setting up direct deposit, but the bonus is one-time and the account fees are ongoing. If the account costs you $10 a month and you earn a $200 bonus, you break even after 20 months—then you are paying $10 a month forever. Read the account terms first, then decide whether the bonus makes a mediocre account worth opening.
Frequently Asked Questions
Can I have checking and savings at different banks?
Yes. You can keep checking at one bank and savings at another. Transfers between banks take one to three business days, but this setup lets you earn a higher interest rate on savings while keeping checking at a bank with branches and ATM access nearby. The tradeoff is managing two logins and accounts.
What is the difference between APY and interest rate?
APY (Annual Percentage Yield) includes the effect of compounding—interest earned on interest. The interest rate is the base percentage. On savings, banks always advertise APY because it is higher and more accurate. A 4.5% APY will earn you slightly more than a 4.5% interest rate compounded monthly.
Do I need a minimum balance to open a checking account?
Most banks do not require a minimum balance to open checking, but many require one to waive the monthly fee or to earn interest on savings. Read the account terms before opening. Some banks have no minimum at all; others require $500 or more.
What happens if I overdraft my account?
If you spend more than your balance, the bank either declines the transaction (if you opted out of overdraft coverage) or charges you an overdraft fee and covers the transaction. Overdraft fees are typically $25 to $40 per occurrence. Some banks charge multiple fees per day if you make several transactions while overdrawn.
Why do online banks pay more interest than traditional banks?
Online banks have no physical branches or ATM networks to maintain, so their overhead costs are lower. They pass those savings to customers in the form of higher interest rates on savings and lower or no monthly fees. The tradeoff is that you cannot deposit cash or speak to someone in person.