There is no single "best" bank—the right choice depends on how you use money
The bank that works best for you depends on whether you need branches you can walk into, how often you travel, what you're willing to pay in fees, and how much money you typically keep in the account. A bank that's perfect for someone who deposits paychecks online and rarely withdraws cash might be terrible for someone who needs to deposit checks in person or who carries a low balance. Start by listing what matters to you, then compare banks on those specific things rather than looking for an overall winner.
The main trade-off is between brick-and-mortar banks (with physical branches) and online banks (no branches, lower fees). Brick-and-mortar banks charge more in monthly fees but let you deposit checks and withdraw cash in person. Online banks have lower or zero monthly fees but require you to deposit checks by photograph or mail, and you'll need to use ATMs or other banks' branches to withdraw cash.
Key Takeaways
- Online banks typically have no monthly fees and higher interest rates on checking balances, but require you to deposit checks by phone app or mail.
- Traditional banks charge monthly fees ($5 to $15) but let you deposit checks and withdraw cash at any branch, which matters if you handle physical money regularly.
- Credit unions often have lower fees and better customer service than large banks, but you must be a member and their ATM networks are smaller.
- The lowest-cost option for most people is an online bank with no monthly fee and no minimum balance requirement.
- Before opening an account, check the bank's ATM network, overdraft policies, and whether they charge fees for common actions like transfers or balance inquiries.
Online banks cost less but require you to handle deposits differently
Online banks like Ally, Charles Schwab, and Discover have no monthly maintenance fees and no minimum balance requirements. They also pay interest on checking balances—usually 4% to 5% annually—which traditional banks rarely do. The catch is that you cannot walk into a branch to deposit a check or withdraw cash.
Instead, you deposit checks by taking a photo with your phone and uploading it through the bank's app. This takes 1 to 3 business days to clear. To withdraw cash, you use ATMs from partner networks (Charles Schwab reimburses ATM fees worldwide; Ally has a smaller network) or you transfer money to another bank and withdraw there. If you rarely handle physical checks or cash, an online bank is usually the cheapest option.
Online banks also have no physical location to visit if something goes wrong, so customer service happens by phone, email, or chat. Most have good reviews for support speed, but you cannot sit down with someone face-to-face to resolve a problem.
Traditional banks charge fees but give you in-person access
Large banks like Chase, Bank of America, and Wells Fargo have thousands of branches where you can deposit checks, withdraw cash, and speak to someone in person. Their checking accounts typically cost $5 to $15 per month, though many waive the fee if you keep a minimum balance (often $500 to $1,500) or set up direct deposit.
These banks also offer overdraft protection, which means if you spend more than you have, the bank covers the difference (for a fee, usually $35 per overdraft). Some people see this as helpful; others see it as a trap that makes overspending easier. Read the overdraft policy before opening an account.
Large banks rarely pay interest on checking balances, so your money sits there earning nothing. They also tend to have more complex fee structures—some charge for transfers, balance inquiries, or paper statements. Compare the full fee schedule, not just the monthly maintenance fee.
Credit unions often have lower fees and better service, with one catch
Credit unions are nonprofit organizations owned by their members. They typically charge lower fees than large banks, offer better interest rates on checking accounts, and have strong reputations for customer service. Many have no monthly maintenance fee and no minimum balance.
The main limitation is that you must be a member to open an account, and membership rules vary. Some credit unions are open to anyone in a geographic area; others require you to work for a specific employer, belong to a certain organization, or have a family member who is already a member. You can search for credit unions you're may be able to access to join at CO-OP.org or Alliant Credit Union's website.
Credit unions also have smaller ATM networks than large banks. Many participate in shared branching networks, which means you can conduct some transactions at other credit unions' branches, but this is less convenient than having thousands of locations like Chase does.
Compare these specific features before you decide
| Feature | Online Banks | Large Traditional Banks | Credit Unions |
|---|---|---|---|
| Monthly fee | $0 | $5–$15 (often waived) | $0–$5 |
| Interest on checking | 4–5% | 0–0.01% | 0.5–2% |
| In-person deposits | No | Yes | Yes |
| ATM access | Limited (partner network) | Thousands of branches | Limited (shared network) |
| Check deposit by phone | Yes | Some banks offer this | Some unions offer this |
| Overdraft protection | Usually not offered | Yes (for a fee) | Yes (for a fee) |
Before opening an account anywhere, check three things: the overdraft policy (does the bank charge $35 per overdraft, or less?), the ATM network (can you withdraw cash without paying a fee?), and whether there are hidden fees for transfers, wire transfers, or stopping payment on a check.
The right choice depends on your actual money habits
If you deposit paychecks by direct deposit, rarely withdraw cash, and want the lowest fees, an online bank is usually the best choice. You'll save $60 to $180 per year in fees and earn interest on your balance.
If you deposit checks in person regularly, need to withdraw cash frequently, or want to speak to someone face-to-face, a traditional bank or credit union makes more sense despite the higher fees. The convenience is worth the cost for your situation.
If you're not sure which category you fall into, open an account at an online bank first. It costs nothing to try, and if you find you need in-person access, you can open a second account at a traditional bank or credit union without closing the online account. Many people maintain accounts at multiple banks for different purposes.
Frequently Asked Questions
Do I need to keep a minimum balance to avoid fees?
It depends on the bank. Online banks almost never require a minimum balance. Large traditional banks often waive their monthly fee if you keep $500 to $1,500 in the account, or if you set up direct deposit. Credit unions vary. Check the specific bank's fee schedule before opening an account.
What happens if I overdraft my account?
If you spend more than you have, the bank either declines the transaction or covers it and charges you a fee (usually $35). Some banks charge per overdraft; others charge once per day. Online banks are less likely to offer overdraft protection. Read the overdraft policy before opening an account so you know what will happen.
Can I switch banks after I open an account?
Yes. You can close an account anytime and move your money elsewhere. The main hassle is updating direct deposit with your employer and changing any automatic payments. Many banks offer a service to help transfer recurring payments to your new account.
Which bank is safest?
All banks insured by the FDIC (Federal Deposit Insurance Corporation) protect your money up to $250,000 per account. This includes most traditional banks and many online banks. Credit unions are insured by the NCUA (National Credit Union Administration) with the same $250,000 protection. Check the bank's website to confirm FDIC or NCUA insurance before opening an account.
Should I open an account at a big bank or a small one?
Big banks have more branches and ATMs, which is convenient if you need in-person access. Small banks and credit unions often have lower fees and better customer service. The trade-off is convenience versus cost. If you rarely visit a branch, a small bank or online bank will save you money.