The best bank for you depends on what you actually use your account for

There is no single "best" bank because banks compete on different things. One bank might offer the highest interest rate but charge fees that eat it back. Another might have branches everywhere but pay almost nothing on your balance. A third might have no physical locations at all but the lowest fees and decent rates online.

The choice comes down to three things: how much interest the bank pays on savings (called the APY, or annual percentage yield), what fees it charges, and whether you need to walk into a branch or can do everything online. Most people find their best fit by deciding which of these matters most to them, then comparing the banks that win on that measure.

Key Takeaways

  • Online banks typically pay higher interest rates on savings because they have lower overhead costs, though they have no physical branches.
  • Traditional banks with branches usually pay lower rates but offer in-person service and may waive fees if you keep a minimum balance.
  • Credit unions often offer competitive rates and lower fees, but membership is restricted to people who meet specific criteria like working in a certain industry or living in a certain area.
  • The difference between a 4.5% APY and a 0.01% APY on $10,000 is about $450 per year, so comparing rates before you open an account matters.
  • Monthly maintenance fees, overdraft fees, and minimum balance requirements can eliminate any interest you earn, so read the fee schedule before you commit.

Online banks pay the most interest but have no branches

Online banks (sometimes called direct banks) operate only through websites and apps, with no physical locations. Because they do not pay for buildings, staff, or ATM networks, they pass the savings to customers in the form of higher interest rates. As of early 2024, online banks commonly offer APYs between 4% and 5.35% on savings accounts, while traditional banks often pay 0.01% to 0.5%.

The trade-off is that you cannot walk in and speak to someone in person. If you need to deposit cash, you will have to use a partner ATM network (which some online banks offer for free, and others charge for) or transfer money from another account. Customer service happens by phone, email, or chat. For most people this is fine. For people who prefer handling money in person or who regularly deposit cash, it can be frustrating.

Online banks also vary in what they charge. Some have no monthly fees at all. Others charge $5 to $10 per month if your balance falls below a certain amount. A few charge overdraft fees if you spend more than you have. Read the fee schedule on the bank's website before you open an account—the interest rate means nothing if fees eat it away.

Traditional banks offer branches and lower rates

Traditional banks (Chase, Bank of America, Wells Fargo, and thousands of smaller regional banks) have physical locations where you can deposit cash, speak to a teller, and get help in person. They also typically have larger ATM networks. For people who like handling money face-to-face or who deposit cash regularly, this matters.

The downside is that interest rates are usually much lower—often between 0.01% and 0.5% APY. On a $10,000 balance, that might be $1 to $50 per year. Many traditional banks also charge monthly maintenance fees ($5 to $15) unless you keep a minimum balance, have a checking account with them, or set up direct deposit. These fees can wipe out any interest you earn.

Some traditional banks waive fees if you maintain a certain balance (often $500 to $2,500) or if you have other accounts with them. If you already bank somewhere, it can be worth asking whether they will waive fees on a savings account. But if you are starting fresh and want the best rate, a traditional bank is usually not the answer.

Credit unions often split the difference

A credit union is a member-owned financial institution that works similarly to a bank but is structured as a nonprofit. Credit unions often offer interest rates that fall between online banks and traditional banks (typically 2% to 4.5% APY), and they usually charge lower or no monthly fees. Many have physical branches and ATM networks.

The catch is that you have to be a member to use a credit union, and membership is restricted. You might be may be able to access because you work for a certain employer, belong to a certain organization, live in a certain county, or have a family member who is already a member. Some credit unions have opened membership to anyone, but most have restrictions. Before you get excited about a credit union's rates, check whether you can actually join.

If you are may be able to access for a credit union, it is worth comparing their rates and fees to online banks. You may find that the combination of decent rates, low fees, and in-person service makes it your best option. You can find credit unions you might be may be able to access for through the CO-OP Network or by searching your employer's name plus "credit union."

How to compare banks side by side

Start by listing what matters most to you. Do you need a physical branch? Do you deposit cash regularly? Do you want the highest possible interest rate? Do you want to avoid any fees at all? Once you know your priorities, you can narrow the field.

Then compare these specific numbers across the banks you are considering:

  • APY on savings: This is the interest rate the bank pays you. Higher is better, but make sure it is the rate for a regular savings account, not a promotional rate that expires after a few months.
  • Monthly maintenance fee: Does the bank charge a fee just for having the account? Is there a way to waive it (minimum balance, direct deposit, linked checking account)?
  • Minimum balance to open: Some banks require you to deposit a certain amount to open an account. Others have no minimum.
  • Overdraft fees: If you accidentally spend more than you have, does the bank charge a fee? How much?
  • ATM access: Can you withdraw cash without paying a fee? How many ATMs does the bank have, or which networks does it partner with?

Write these down for three to five banks and add them up. A bank with a 4.5% APY and no fees will almost always beat a bank with a 0.1% APY and a $10 monthly fee, even if the second one has more branches.

What to watch out for when you open an account

Read the account agreement before you sign anything. Banks are required to give you a document called the Deposit Account Agreement or Account Terms and Conditions, and it spells out all the fees, the interest rate, and what happens if you overdraw. It is boring, but it is where banks hide the details that matter.

Watch for promotional rates. Some banks advertise a very high APY (5% or higher) but only for the first few months or only on balances up to a certain amount. After the promotional period ends, the rate drops to something much lower. If the bank is offering a promotional rate, ask what the regular rate will be after the promotion ends.

Check whether the bank uses compound interest and how often it compounds. Most savings accounts compound interest daily, which means you earn interest on your interest. Some compound monthly or quarterly, which means you earn slightly less. This matters more the longer your money sits in the account, but it is worth knowing.

Finally, make sure the bank is FDIC insured (if it is a bank) or NCUA insured (if it is a credit union). This means the federal government guarantees your money up to $250,000 if the bank fails. Every legitimate bank and credit union has this insurance. If a bank does not mention it, do not open an account there.

Frequently Asked Questions

Can I move my money to a different bank later if I change my mind?

Yes. You can close a savings account at any time and move your money to another bank. There are no penalties for switching. The process usually takes a few days. If you are not sure about a bank, you can always start with a small amount and move more money once you are comfortable.

What is the difference between a savings account and a money market account?

A money market account usually pays slightly higher interest than a savings account but limits how many withdrawals you can make per month (often six). If you plan to add money regularly but rarely withdraw, a savings account is simpler. If you want the highest rate and do not mind the withdrawal limit, a money market account might pay more.

Should I open a savings account at the same bank where I have my checking account?

Not necessarily. Many people keep their checking account at a traditional bank for convenience and move their savings to an online bank for the higher rate. You can have accounts at multiple banks. The only advantage to keeping everything in one place is that it is slightly simpler to manage.

Do I need a minimum balance to earn interest?

Most banks pay interest on any balance, even $1. However, some banks only pay interest if your balance stays above a certain amount (like $500). Check the account agreement to see whether there is a minimum balance requirement for earning interest, as opposed to a minimum balance to open the account.

What happens to my money if the bank goes out of business?

If the bank is FDIC insured, the federal government guarantees your money up to $250,000. If you have more than $250,000, the amount over that is at risk, but most people do not have that much in a single savings account. You can check whether a bank is FDIC insured on the FDIC website.