You might already know where you want to bank even if you aren’t yet sure of the steps to open an account there. If not, shop around. Start by finding the best match for your immediate need (a checking account or savings account, for example). As you compare institutions, be mindful of account usage restrictions and fees, which can quickly add up.
There are three basic categories of financial institutions:
- Banks, including community banks and big banks: These might be well-known brands in your local community (or nationwide). They offer most of the basic services you need. Local and regional banks tend to have more friendly fee structures, but it may be possible to get fees waived at big banks.4
- Credit unions: A credit union is a customer-owned financial institution that provides many of the same services and products that banks provide. If you opt to join one of these not-for-profit institutions, you’ll often enjoy competitive rates because they’re not necessarily trying to maximize profits. But that’s not always the case—so review fee schedules carefully.
- Online banks and credit unions: These institutions operate entirely online. There’s no branch to visit (or pay for), and you’ll handle most service requests yourself. If you have access to and are comfortable using a computer or mobile device—and performing basic banking transactions—an online bank can help you reduce your fees, earn higher interest rates on savings accounts, and even get free checking.
If you prefer, you can even pick more than one type of bank. For example, you may decide to open an online bank account and keep your brick-and-mortar bank to keep your fees low and maintain the ability to visit a bank in the event of a financial emergency.