A good bank account matches what you actually do with money

A good bank account is not the same for everyone. The right account for you depends on how you get paid, how often you move money around, what fees would hurt you most, and whether you need to walk into a physical branch or prefer to do everything online. Before you open anything, think about your own situation — not what the bank's marketing says is best.

The account that works well for someone who gets a weekly paycheck and pays bills online might be terrible for someone who receives cash tips and needs to deposit them in person. The account that charges no monthly fee might have high overdraft fees that cost you more. A good account is one where the way it works matches the way you live.

Key Takeaways

  • The best account for you depends on how you get paid, how often you move money, and which fees would cost you the most.
  • Monthly maintenance fees, overdraft fees, and minimum balance requirements are the three costs that matter most to compare.
  • You can have more than one account at different banks if one handles paychecks well and another has better savings features.
  • A checking account is for money you spend regularly; a savings account is for money you want to keep separate and grow.
  • Online banks usually have lower fees than branch banks, but you cannot deposit cash in person unless they partner with a network.

The three costs that actually matter

Most bank accounts charge money in three ways. Understanding these three will tell you more than any marketing slogan.

Monthly maintenance fees are what the bank charges just to have the account open. Some banks charge nothing. Others charge $10 to $15 a month, though many waive the fee if you keep a certain balance or set up direct deposit. If you have $200 in the account and the fee is $12 a month, you are paying 72% of your balance per year just to have the account exist. That matters.

Overdraft fees are what the bank charges when you spend more money than you have. If you have $50 in the account and you swipe your debit card for $60, the bank covers the $10 — and charges you $30 to $35 for doing it. Some banks charge this fee every single time you overdraft on the same day. Others charge it once per day. A few let you turn overdraft protection off so the card straightforward declines instead. This is the fee that surprises people most, and it hits hardest when you are already short on money.

Minimum balance requirements mean the bank wants you to keep a certain amount in the account or they charge you a fee. This might be $500 or $1,500 depending on the bank. If you cannot keep that much in the account, you will pay a monthly fee. Some accounts have no minimum at all.

Checking accounts versus savings accounts

A checking account is designed for money you use regularly. You get a debit card, you can write checks, and you move money in and out often. The bank expects you to spend from this account.

A savings account is designed for money you want to keep separate and let grow. You get a debit card too, but the account usually has a lower interest rate and limits on how many times per month you can move money out without a fee. The bank wants you to leave money in this account.

Many people have both at the same bank. You use checking for everyday spending and bills, and savings as a place to put money aside for emergencies or goals. Some banks offer a combined package where you get one monthly fee for both accounts instead of paying for each one separately. Others charge you separately for each account.

If you are new to banking, start with a checking account. Once you have one that works, you can add a savings account later if you want a place to keep emergency money separate from the money you spend on rent and food.

Branch banks versus online banks

A branch bank has physical locations where you can walk in, talk to a person, and deposit cash or checks by hand. Wells Fargo, Bank of America, and Chase are branch banks. They usually charge monthly fees and require higher minimum balances, but some people need the option to walk in with a question or deposit cash in person.

An online bank has no physical branches. You do everything through a website or phone app — you cannot walk in. Online banks usually charge lower or no monthly fees and have lower minimum balance requirements because they do not pay for buildings and staff. Ally, Charles Schwab Bank, and Discover Bank are online banks. The trade-off is that you cannot deposit cash in person at a branch.

Some online banks solve the cash problem by partnering with ATM networks or retail stores. You can deposit cash at certain ATMs or at a Walgreens or CVS, and the money goes into your account. Before you open an online account, check whether you can deposit cash somewhere near you. If you get paid in cash and have no way to deposit it, an online bank will not work.

What to look for when you are comparing accounts

Make a list of the three things that matter most to your situation. For example: "I get paid by direct deposit, I need to deposit cash sometimes, and I do not want to keep a minimum balance." Then look at accounts that solve those three things.

Check the fee schedule on the bank's website. This is usually a PDF or a page called "Pricing" or "Fees and Charges." Write down the monthly maintenance fee, the overdraft fee, and the minimum balance requirement for each account you are considering. Do not rely on what a bank employee tells you — the written fee schedule is the official version.

Look for accounts that let you turn off overdraft protection. This means if you do not have enough money, the card will decline instead of charging you a $35 fee. Some banks call this "overdraft opt-out" or "decline transactions." If you are worried about overdraft fees, this feature is worth more than a slightly lower monthly fee.

Ask whether the bank offers a second chance checking account if you have had banking problems in the past. These accounts have higher fees but are designed for people who have been denied a regular account. ChexSystems is a database that banks use to check your history. If you have had accounts closed or written bad checks, you might be in ChexSystems. A second chance account can help you rebuild.

Why you might want more than one account

You do not have to keep all your money at one bank. Some people open a checking account at a branch bank because they need to deposit cash in person, and a savings account at an online bank because the interest rate is better. Some people keep a checking account at their employer's preferred bank because payroll is faster, and a separate account at another bank for emergencies.

Having two accounts takes a little more work to manage, but it can save you money if one bank is better at one thing and another bank is better at something else. Just make sure you can keep track of both accounts and both passwords.

Red flags that an account is not good for you

If an account requires a minimum balance you cannot keep, it is not a good account for you — even if the monthly fee is low, because you will pay the fee most months. If an account charges overdraft fees and you cannot turn off overdraft protection, and you know you sometimes spend more than you have, that account will cost you money every time you make a mistake.

If you cannot deposit cash and you get paid in cash, that account will not work. If the bank has no customer service phone number or only offers chat support and you need to talk to a person, that might be frustrating for you. A good account is one where the features match your life, not one where you have to change your life to match the account.

Frequently Asked Questions

How do I know if a bank is safe and will not lose my money?

Banks in the United States are insured by the Federal Deposit Insurance Corporation (FDIC). This means if the bank fails, the government protects your money up to $250,000 per account. You can check whether a bank is FDIC-insured on the FDIC website. If a bank is FDIC-insured, your money is safe even if the bank goes out of business.

What is the difference between a debit card and a credit card?

A debit card takes money directly from your bank account when you use it. A credit card borrows money from the credit card company, and you pay them back later. With a debit card, you can only spend what you have. With a credit card, you can spend money you do not have yet, but you will owe interest if you do not pay the full balance.

Can I change banks if I do not like my current account?

Yes. You can open a new account at a different bank anytime. You will need to update your direct deposit information with your employer and change any automatic bill payments to the new account. You can keep your old account open while you switch, or close it once everything is moved over. There is no penalty for switching banks.

What happens if I do not have enough money to cover a check I wrote?

If you write a check for more money than you have in the account, the check will bounce. The person or business you wrote it to will not receive the money, and the bank will charge you a fee — usually $30 to $35. The person you wrote the check to might also charge you a fee. It is better to not write a check if you are not sure you have the money.

Do I need a savings account if I already have a checking account?

No, you do not need one right away. A checking account is enough to get your free guide. Once you have a checking account that works for you and you want a separate place to keep emergency money, you can open a savings account. Many people find it easier to save money when it is in a different account from the money they spend on everyday things.