Alright, gather round. This is going to be important.
For the sake of this article, I’m assuming you, or someone you know, doesn’t have a checking account and I’ve convinced you that you, or they, need one. Great! Let’s walk you through it.
Terms of the trade
First up, a bit of terminology.
Yikes, are you sure you want to lead with boring vocab words?
I do indeed. Vocab and terms suck to learn about, but learning about them now avoids a lot of confusion in the future. So here we go, I’ll keep it brief.I’ll be referring a lot to ‘banks’, since everyone calls the place you put your money a ‘bank’, but in reality the word ‘bank’ refers specifically to commercial banks like Bank of America or Chase Bank. Other financial institutions, like credit unions, aren’t technically banks, but I’m going to refer to them as banks too and only make the distinction between a commercial bank or a credit union when it’s important.
Decisions, decisions
Okay, with that out of the way, you’ll want to choose a bank to set up your checking account with. After all, you may now know you want a checking account, but you may not know which bank is the right one for you.
I’ll probably just end up going with the one my parents use. Or maybe the one Jennie down the street uses. They seem pretty happy with them I guess?
I’d advise you to make up your own mind on this one. It’s likely that your folks, or Jennie, are generally intelligent people so, chances are, their bank is at least okay. But what if they went with their current bank simply because their parents used it to? Is the bank actually a good fit for anyone or are they just following along with whatever everyone else is doing?
Does it really matter though? A bank is a bank and they aren’t all that different from each other.
Nothing could be further from the truth! Despite how similar banks may look on the surface, there can be a lot that differentiates them when you look a little deeper.
Things like:
- Location. Does the bank actually even have branches near you? Sometimes, things go more smoothly when you can talk to a real person, in person. If it’s important to you to be able to physically visit your bank, then where their branches are located can make a big difference in choosing one!
- Type of bank. Do you want a commercial bank, like Bank of America or Chase? Or would you prefer something like a Credit Union like Blue Federal Credit Union or Austin Telco Credit Union? More on this later.
- Offers for signing up. Some banks want your business so badly, they’ll literally pay you money just to open an account and put money in it! Oftentimes there are some strings attached, like the amount they require you to deposit to get the bonus can be high, but free money is free money if you can meet the requirements.
- Terms and fees. Many commercial banks, like Bank of America and Chase, charge fees to provide you with a checking account. Usually these fees can be waived if certain conditions are met e.g., setting up direct deposits into the checking account or having a certain minimum amount of cash in your account each month.
There are certainly other factors, but, to me, these are the most important.
A deeper dive on the details
‘Location‘ is pretty straightforward: you want to open a checking account with an institution you can actually physically go into if need be. Sometimes talking to a real person is extremely helpful, so don’t think this factor can be ignored.
That does make sense. If I have a complicated issue I need help with, it can be impossible to try to explain it to someone over the phone or email or chat.
Indeed. Next, I’ll combine ‘offers for signing up‘ and ‘terms and fees’. These are pretty straightforward too. All else being equal, if Bank A is going to give you a $200 bonus for signing up and Bank B won’t, go with Bank A! Don’t pass up an opportunity to make money for doing what you were going to do anyway. Similarly, if a bank is going to charge you a bunch of money each month for basic banking, maybe look elsewhere unless they’re willing to waive the fee.
Now, on to ‘commercial banks vs credit unions‘. This can come down to personal preference, but for me, credit unions win hands down every time for basic checking accounts. They typically have no fees for opening or maintaining a checking account, as long as you actually use the checking account at least once a month. On top of that, you get pretty much all the same perks as a full commercial bank, like competitive savings account rates, access to mortgages and loans, and even a mobile app for banking on-the-go. All standard at credit unions. Oftentimes too, credit unions pride themselves on top-notch customer service and will usually put in the extra effort to keep their members happy.
Wait though. If that’s the case, how is Bank of America such a huge company? Why don’t people all just go with credit unions?
Well, for one, banks can offer a much wider variety of products than credit unions. In just checking accounts alone, I noticed Chase had three different kinds of specialized checking accounts just for kids of different ages to start using banking services and saving money. Each kind of account had different, specialized perks and features that would be useful to both the kid and the parents. That’s pretty darn impressive. By comparison, Blue Federal Credit Union had exactly one youth checking account, with very few perks or special features. A commercial bank will also typically have way more branch locations and ATMs than credit unions. This means you’ll have more access to banking services nationwide, should you need them.
So, what’s right for me?
The choice, ultimately, is up to you. If you want an accessible, no-frills checking account with no fees at an institution that will probably provide you with great service, then a credit union is for you. If you prefer convenience; a wider variety of products, options, and features; and don’t mind meeting the minimum requirements to avoid monthly checking account fees, a commercial bank may be a better fit. This really is a personal choice, so whatever works best for you is great! And you can always change banks later if things don’t work out with the first one you go with.
Sounds good. How would I go about actually setting one of these checking accounts up?
Read on in the next article!
Thanks for reading.
Common Cents 