Selecting the Right Bank for You

There is more to a bank than just a place to store some cash. There are several types or banks and products offered, but what best fits your circumstance? Elizabeth Ayoola, NerdWallet Banking Spokesperson & Writer joins Cassidy Clement, IBKR’s Senior Manager of SEO and Content to discuss active vs passive investments.

Summary – Cents of Security Podcasts Ep. 40

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Cassidy Clement 

Welcome back to the Cents of Security podcast. I’m Cassidy Clement, Senior Manager of SEO and Content at Interactive Brokers. Today I am your host for our podcast. Our guest is Elizabeth Ayoola. She is Nerd Wallet’s Banking Spokesperson and a writer. 

There is more to a bank than just the place to store your cash. Several types of banks or products can be offered to you, but what best fits your circumstance? That’s what we’re going to discuss today. So welcome to the program, Elizabeth. 

Elizabeth Ayoola 

Thank you for having me. Very happy to be here.

Cassidy Clement 

Great. So, since you’re on your first episode for us, if you want to give the listeners a little bit about your background, that’d be very helpful. 

Elizabeth Ayoola 

Of course. So, Elizabeth, who is myself, is a personal finance writer, and I’ve been writing finance topics for about four years now. Wow. It feels like a long time. I’m also a  spokesperson at Nerd Wallet and I cover a range of topics, including banking, which we’ll be talking about today, investing and sometimes taxes, too.  

Cassidy Clement 

Great. So just to kick off the topic in general, what types of banks are there to choose from? 

Growing up, I was in a smaller town in the North East, and it was like, OK, we have a few of the main ones, regional one and then a credit union which was a little confusing. So what types are out there? I’m sure a lot of listeners had the same experience as myself if they didn’t live in a big city. 

Elizabeth Ayoola 

Right. It could be so overwhelming. So even when I reach adult age and I had to basically choose a bank, I’m like, wow, this is too much.  

So there’s two ways that you can break it down in terms of the type of banks there are. There’s the type of accounts that there are. And then there are the type of banks. So to start with the banks, you have national banks, and those are usually your brick-and-mortar banks. And the benefit of these is they have a range of different products that you can choose from. You also have regional and community banks, and these are usually smaller national banks and they’re a lot more relationship focused.  

You have credit unions, which I personally am a fan of and use and these are not-for-profit banks. And one of the benefits of them is that they usually have low to no checking fees. Yay for that. And lower interest rates on loans.  

You also have online banks, which are becoming so much more pervasive now. I have two online banks and the benefit of these banks is they usually have high rates for savings and also they don’t usually have many monthly fees, if any at all. The disadvantage is usually they don’t have brick-and-mortar locations. 

And then you also have neobanks and these are relatively new banks, and they’re mostly fintech companies who partner with banks to offer mobile first bank accounts. 

Cassidy Clement 

So just to go in a little bit deeper, what differentiates them? How would a credit union differentiate from your standard larger bank? How exactly does that work? 

Elizabeth Ayoola 

So, there are different differentiators again, which is where it can get confusing, which is why I love comparison charts because it helps you look at the different products side by side.  

So for example, for a credit union that is usually not for profit and whereas the National Bank is for profit. Another thing with credit unions is, as I mentioned, they usually have low to no checking fees, whereas your national banks might have fees.  

I actually have both, so I love this question because I closed my national bank, which I had for years. Today, actually! And stuck with my credit union because there were no fees and I just felt like, why am I paying fees when I can get an account for free?  

Another thing with national banks versus credit unions is national banks usually have a lot more branches, whereas credit unions might be more scanty.  

So I think in order not to get lost in all of the detail of kind of the different types of banks, a good starting place is asking yourself what do I need from an account? 

Cassidy Clement 

Are there certain ways to tell whether one bank is, I guess, essentially better than another? Obviously, you mentioned there’s going to be a circumstance to your own situation or what you favor, but is there kind of a way to say like, OK, objectively bank A is better than bank B or something like that? 

Elizabeth Ayoola 

I’m going to start generally and say that some things that people should think about when asking themselves is this bank better than this bank, is fees. So, most of us don’t want to pay fees when we’re banking, but in some situations, you might need to, but you want to think about fees. Who has the lowest fees or no fees at all?  

Some kind of common fees that you might see come up are monthly maintenance, inactivity, overdraft fees, and sometimes these fees can be waved as well. You also want to look at maybe sign-up rewards. So are you going to get a sign-up bonus for joining a certain bank?  

You want to think about technology. I know we are in the tech age. I personally am a little backwards, so I am not that big on tech. But some people are and they want a really good app when they’re banking or something that’s easy to navigate. So think about that.  

And then two other things to think about, our customer service and whether the account has FDIC insurance or any kind of insurance to cover you if the bank goes bust. So those are some things you want to keep in mind. But now when you’re asking, as I mentioned earlier, what bank is best for me or what bank is better for me, think about why you need this account.  

Some of the factors that you might consider are do I want to make several, I don’t know, international wire transfers a month and which bank is going to be better for that and offer me the lowest fees for that?  

So you want to maybe list out three to five things that are important features for you to have in a bank and then compare the different banks and the services they offer and choose based on that. 

Cassidy Clement 

You mentioned a handful of items that you want to look for, but are there core items that someone would look for in a bank that I guess you can kind of say the basics that you want to be there if you decide to go with them?  

Maybe it’s lending savings accounts, checking accounts, like what are those core things that people should be looking for to be like yeah, that may be the place to park this amount of money. 

Elizabeth Ayoola 

I think, based on that, people should think about what they need now and also long-term. Because sometimes with banking we think about what we need now, but we’re not thinking about the future.  

So as an example, I might just say starting out right now all I need is a basic checking account to pay my bills and I need a savings account to put my emergency fund in. Whereas I currently am not a homeowner, but I would hope to be in the next couple of years, so something I might want to think about also in a bank for the long term is one that offers good loan products.  

So I might want to look at the lending products that they offer as well. So I would just say again, it still kind of just ties back to what are your needs because everybody’s needs are extremely different.  

So loan products are something to look at, savings accounts. But I think it’s also important to insert here that you don’t have to try to get everything in one bank. It’s OK to have several bank accounts.  

As I mentioned earlier, I currently have three and they all serve different purposes for me, so it’s OK to kind of shop around and have different accounts that meet your different needs. 

Cassidy Clement 

I think you really touched on something that’s important. You have different scenarios in your life so you might have a certain bank for certain needs, maybe one for the homeownership and one for your savings account and one for where your paycheck goes, something like that.  

But when our listeners or anybody is thinking about selecting a bank, what are some items that people might not initially think about when doing the final decision? I know one that a lot of people don’t think about. They sometimes look initially at the numbers. Because it’s a numbers service.  

The online customer service or customer service in general. That’s a big one because it’s your money. If something goes wrong, you want to be able to get in touch with somebody. And as you mentioned, online banking, you think that it’s a given in today’s day and age, but there’s a chance that their online customer service, if you need to get in there and talk to somebody at 2:00 AM, there’s a chance that might not be as good. 

Elizabeth Ayoola 

Yes, absolutely. So I love those. That’s really, really important. I know that it is very annoying when I need to get through to my bank and I have to wait maybe I don’t know, an hour or two on the phone just to get through to someone. So you definitely want to think about customer service.  

I think another important thing to think about is your minimum balance requirements. Again, the account I recently closed, that was one of the reasons I closed it as well. Because I get charged a fee if my balance is under a certain amount, whereas with the other accounts I have, there is no minimum balance requirement.  

You also want to think about overdraft fees. How much are you going to get charged if  maybe you don’t have enough in your account and a payment comes out? You want to compare that as well.  

I think ATM access is an important one as well. If you need to withdraw cash, do they have enough ATMs nearby? And also, do they waive the fee? Because some banks, if you use ATM out of network, will waive the fee for you.  

And this is a fun one I will add as well, which is one of the reasons I am sticking to one of my new banks is cash back rewards. Which I love, love, love.  

So I get cash basically just for spending money and I think that’s a great perk to have in an account as well. Because you can redirect those funds to different kind of financial needs. And essentially it’s passive income. 

Cassidy Clement 

The one that resonated with me, at least for let’s say the new employees or new graduates. ATMs and banking branches.  

When you move for a job across the world, across the state, across the town, if you don’t have a car or if there’s not a lot of public transportation and you need to get to a bank and it’s not in your region or your area, you might find yourself in a bit of a panic.  

And where our office is here in Greenwich, we’re not far from New York City, where there’s a lot of different banks, but guess what? It’s a different state line when you take that train over to Connecticut and it’s a different world over here.  

So the banks might not be the same and that’s something really to think about if you’re taking on a different banking function. As you said, if you’re saying, oh, this is my spending money bank, well, hopefully you’ve got an ATM nearby if you’re a person who likes cash. Because otherwise, you’re going to have to hope that they waive those fees at the gas station ATM that you use or wherever you decide to go. 

Elizabeth Ayoola 

Exactly. And I know that I have been in situations like that where there wasn’t an ATM nearby and I ended up being charged high fees and my bank did not waive those fees. So again, and I think sometimes it took me so long to close this particular account because it’s the first one I had, and I had a sentimental attachment to it.  

But then when you kind of just weigh out the pros and cons and see how much maybe you’re spending in all of these unnecessary fees, then you realize, hey, maybe there’s a better bank out there for me.  

So all that to say, don’t feel like you’re cheating on your bank if you decide to go and open a different one elsewhere. 

Cassidy Clement 

It’s important to understand that some of them may be a sizing limitation. Like if it’s a more of a rural bank, it may be the sizing limitation. You may have fees associated if you get paper statements. Don’t forget about that one now that we’re in 2024.  

I’ve had that happen where they call you and say hey, surprise, remember that account that you opened at 16? Well, we know we’re old school, but those statements that we’re sending you, you’ve got to log in to this old platform and change it up to paperless or we’re going to charge you for the statements about your account.  

That’s the day and age we’re in. Trees cost money, so they’re going to ask you if you can pay, but these are things to really think about as you start to embark on your financial journey. 

Elizabeth Ayoola 

Absolutely. I agree with that. And those accounts may seem insignificant, but they can definitely be used for something else other than paying an unnecessary fee. 

Cassidy Clement 

So it’s important in a way to think about also, if you’re going to do the “parking your money”, also if they have any products that align with that, maybe it’s a CD, maybe it’s certain interest rates.  

Another thing that sometimes people don’t think about is, and I hate to say this in the world of self-checkout, but you can actually go into your bank and talk to a banker. You can do that.  

Let’s say Grandma won the lottery and said here’s a cool $500. Why don’t we take that money and put it into some type of a high-yield savings or something like that? You can go in and talk to somebody and actually explain your situation. You don’t have to go in doing the math on your own or doing only your own research. 

Elizabeth Ayoola 

I haven’t been inside a brick-and-mortar bank, oh my gosh, in years.  

But actually, thank you for bringing that up, because that’s an important thing to think about, as well.  

So if, like yourself, you’re somebody who wants to just talk to someone and don’t really have the patience to be looking at articles and reading stuff online, then you might not want to go, for example, for an online bank. Because they usually don’t have any physical locations. But if you’re more just do it yourself, don’t want to talk to anyone, then an online bank might be better for you. 

Cassidy Clement 

From the credit union perspective, if there’s anything involving what line of employment you’re in or I think for some credit unions, it could be like a social group, maybe a church or some type of like community bond of some sort, that is your overlapping reason of being a union, there can be a lot of ways for you to actually get more clarification than a quick Google.  

I know it’s the easiest. I work in SEO. It’s my line of work, but it doesn’t always yield the best for your situation or circumstance specifically. Like most things in finance, you’ve got to do your homework a little bit. 

Elizabeth Ayoola 

Yes, absolutely. And I mean, if you can get free financial advice from just going into a bank and talking to someone, then why not? 

Cassidy Clement 

So before we close out, is there anything else that you would want to tell our listeners about when it comes to choosing the bank, who you’re giving your cash to? 

Elizabeth Ayoola 

The only other thing I have to say to listeners is I know that choosing a bank account can be overwhelming, especially when you’re choosing your first one, but know that there’s always an opportunity, again, to open a different bank if you don’t like the bank that you’re with. 

And banking should be a positive experience and one that you enjoy. And one that comes with ease as well.  

I know when I first chose a bank, I did not think about that and honestly, I just chose the first one that I saw that looked like a good bank and I didn’t think about what my needs were. But now that I know more, I’m able to basically make more informed decisions and I’ve been able to choose different accounts that fit my financial needs and that are helping me to reach my financial goals. So just keep that in mind. 

Cassidy Clement 

Couldn’t agree more. Explore your options. Make sure they fit your financial circumstance. Well, thank you for joining us, Elizabeth. 

Elizabeth Ayoola 

Thank you for having me. 

Cassidy Clement 

Sure. So as always, listeners can learn more about an array of financial topics for free at ibkrcampus.com. Follow us on your favorite podcast network and feel free to leave us a rating or review. Thanks for listening everyone. 

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