The bank you choose depends on what you do with money most often
There is no single "best" bank. The right choice depends on whether you need to deposit checks, withdraw cash frequently, send money to other people, keep a low balance, or avoid fees. A bank that works well for someone who gets paid by direct deposit and rarely touches their account may be wrong for someone who needs to cash checks and move money between accounts constantly.
Start by listing what you actually do: How often do you visit a branch in person? Do you need to deposit checks or cash? Do you send money to other people regularly? How much do you typically keep in the account? Do you overdraft sometimes? The answers to these questions narrow down which type of bank makes sense for you.
Key Takeaways
- Traditional banks with physical branches charge higher fees but let you deposit cash and checks in person, which matters if you don't have direct deposit or a smartphone.
- Online banks have no branches and lower fees, but they require you to deposit checks by photo or mail them in, and they have no ATMs of their own.
- Credit unions are member-owned and often charge fewer fees than banks, but they have smaller branch networks and may require you to live or work in a specific area to join.
- Prepaid cards and money transfer services like PayPal or Cash App work for receiving and sending money but do not replace a bank account for direct deposit or building credit history.
- The cheapest account is not always the best one if it charges you a fee every time you do something you do regularly.
Traditional banks with physical locations
A traditional bank has branches you can walk into, ATMs you can use, and tellers who can help you in person. You can deposit cash and checks without a smartphone or camera. If something goes wrong with your account, you can sit down with someone and fix it face-to-face.
The trade-off is fees. Most traditional banks charge a monthly maintenance fee ($5 to $15) unless you keep a minimum balance or set up direct deposit. They also charge overdraft fees ($25 to $35 per overdraft) and out-of-network ATM fees ($2 to $3 per withdrawal). If you overdraft once a month and use out-of-network ATMs twice a week, those fees add up faster than the monthly maintenance fee.
Traditional banks make sense if you receive cash payments, need to deposit checks in person, rarely use ATMs, or want to talk to someone when something breaks. They also tend to be the easiest option for getting a debit card quickly and for building a relationship that matters later if you need a small loan.
Online banks with no physical branches
An online bank exists only on the internet and through a mobile app. It has no branches and no ATMs. In exchange, it charges much lower fees — many online banks have no monthly maintenance fee, no overdraft fees, and no minimum balance requirement.
To deposit a check, you photograph it with your phone and upload the image. To deposit cash, you have to mail it in or use a third-party service, which takes longer. To withdraw cash, you use an ATM network that the bank partners with, or you go to a grocery store and ask for cash back when you buy something.
Online banks work well if you get paid by direct deposit, rarely need cash, and have a smartphone. They do not work if you receive checks regularly and need to deposit them the same day, or if you need to withdraw cash when ready and do not have a nearby ATM partner.
Credit unions
A credit union is a bank owned by its members rather than by shareholders. It is nonprofit, which means it returns profits to members in the form of lower fees and better interest rates on savings accounts. Credit unions often charge no monthly maintenance fee, no overdraft fees, and no minimum balance.
The catch is that you have to be a member to use the credit union. Membership usually requires that you live or work in a specific area, belong to a certain profession, or have a family member who is already a member. Some credit unions have opened membership to anyone, but most still have restrictions.
Credit unions also have smaller branch networks than big banks. If you move to a different state, your credit union may have no branches there. However, most credit unions are part of a shared branching network, which means you can use branches of other credit unions in your area.
Prepaid cards and money transfer services
A prepaid card (like NetSpend or Green Dot) and a money transfer service (like PayPal, Cash App, or Venmo) let you receive and send money without a traditional bank account. You load money onto the card or app, and you can spend it or send it to someone else.
These are not bank accounts. They do not build credit history, they do not offer the same fraud protection as bank accounts, and they often charge fees for things a bank account does not charge for — like checking your balance or transferring money to another account. Some employers will not set up direct deposit to a prepaid card.
Prepaid cards and money transfer services work as a temporary solution or a supplement to a bank account, but they should not be your only way to receive and store money if you have other options.
What to compare when you are choosing
| Feature | What it costs you | When it matters |
|---|---|---|
| Monthly maintenance fee | $0 to $15 per month | If you keep a low balance or do not meet the minimum balance requirement |
| Overdraft fee | $25 to $35 per overdraft | If you sometimes spend more than you have in the account |
| Out-of-network ATM fee | $2 to $3 per withdrawal | If you withdraw cash more than once or twice a month |
| Check deposit by mail or photo | Takes 1 to 5 business days | If you receive checks and need the money quickly |
| Cash deposit options | Requires a branch or mail | If you receive cash payments or need to deposit cash the same day |
| Direct deposit | Usually free, sometimes required for fee waiver | If your employer or benefits program offers it |
Write down what you do most often and how much each fee would cost you in a year. A bank with a $10 monthly maintenance fee costs $120 a year, but if you overdraft twice a month, that is $600 a year in overdraft fees alone. An online bank with no fees but a three-day check deposit delay might save you money even if you deposit a check once a week.
How to open an account
Most banks let you open an account online or in person. You will need a government-issued ID, your Social Security number, and proof of address (a utility bill, lease, or bank statement). Some banks also run a background check through ChexSystems, which is a system that tracks banking history. If you have been flagged for fraud or unpaid overdrafts at another bank, some banks will deny you.
If you are denied, ask the bank why. If it is because of ChexSystems, you can request a copy of your report and dispute errors. Some banks specialize in second-chance accounts for people with banking history problems — they charge higher fees, but they will open an account for you.
Once your account is open, set up direct deposit if your employer or benefits program offers it. Direct deposit is the fastest and safest way to receive money, and it often waives the monthly maintenance fee.
Frequently Asked Questions
Can I have accounts at more than one bank?
Yes. Many people keep an account at a traditional bank for deposits and an account at an online bank for savings, or an account at a credit union and a bank. Just remember that each account is insured separately up to $250,000 by the FDIC (or NCUA for credit unions), so if you keep more than $250,000 total, spread it across different banks.
What if I have been denied a bank account before?
Ask the bank why you were denied. If it is because of ChexSystems, you can get a free copy of your report at chexsystems.com and dispute any errors. Some banks offer second-chance accounts with higher fees. Credit unions are sometimes more flexible than traditional banks about past banking problems.
Do I need a smartphone to use an online bank?
Most online banks work on a computer as well as a phone, but depositing checks by photo requires a smartphone or camera. If you do not have a smartphone, you can mail checks in, but it takes longer. A traditional bank or credit union may be better if you cannot use mobile check deposit.
What is the difference between a bank and a credit union?
A bank is a for-profit business owned by shareholders. A credit union is a nonprofit owned by its members. Credit unions usually charge lower fees and offer better interest rates, but they have smaller networks and membership requirements. Both are insured by the government up to $250,000.
Can I move my account to a different bank later?
Yes. You can close an account at any time and open one at another bank. The new bank can help you set up direct deposit with your employer so future paychecks go to the new account. Just make sure you have paid any outstanding checks or automatic payments before you close the old account.