When looking for a new bank, you have plenty of options. Your first instinct might be to choose the same bank that your parents use if you’re opening a new deposit account for the first time, but that may not be the best fit for your lifestyle and financial needs.
Banks are all different when it comes to the products they offer or the features and benefits their customers enjoy. There are different types of banks and one may better suit your needs than another.
Traditional banks
Traditional banks are brick-and-mortar banks with branch locations. Many of the “big banks” fall into this category. These traditional retail banks offer various financial products and services, including personal banking and business banking. They may also have monthly maintenance fees, minimum fees, overdraft charges, and ATM fees.
Credit unions
Credit unions are like banks, but instead of being privately owned, they’re non-profit organizations that are owned by their members. Credit unions offer many of the same products and services as banks, but they may be able to offer lower fees and higher interest rates than a traditional bank.
You’ll first need to join a credit union before you can open a new bank account. Credit union membership may be based on:
- Where you work
- Where you live, attend school, or worship
- Military affiliation
- Affiliation with professional organizations
Some credit unions, however, have no such requirements and allow anyone 18 or older to join by opening a share savings account. This is the equivalent of a basic savings account at a traditional bank.⁵
Regional banks
Regional banks are a type of traditional bank, but they generally have a smaller geographic footprint. In terms of size, a regional bank fits in between a large bank that operates nationally and a smaller community bank that’s locally focused.
A regional bank may have branches and ATMs in a specific part of the country or selected states only. For example, if you live along the East Coast, you might choose a regional bank with locations spanning from New York to Florida.
Online banks
Online banks are financial institutions that primarily offer banking capabilities via the Web and your smartphone rather than in person at branch locations. Because these online banks save money on physical locations, many can offer higher interest rates on savings accounts while charging lower fees than traditional banks.
Some online banks operate as a larger national or regional bank’s digital arm. Others are technically “neobanks,” which are slightly different.
Neobanks
A neobank is sometimes technically not a bank. Instead, it’s a fintech company that offers banking services in partnership with an FDIC-member chartered bank. Those services are typically available via a mobile app or online banking access.⁶
Neobanks can offer checking and savings accounts with the features you’d expect from a regular bank. For example, you can get a debit card to access your money, and you might earn interest on savings.
The appeal of neobanks often lies in the fact that they’re not banks and appeal to people who may be dissatisfied with their past experiences using traditional banking services.
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