How to choose the right bankPicking a bank is like selecting a new paint color for your kitchen. You're going to see a lot of it, and while you can always change your mind if you don't like the one you've chosen, it's a hassle. Selecting the one best suited to you depends on what you need from your financial institution, and that can be complicated, especially because there are so many options.

While all banks are financial institutions, not all financial institutions are banks: They can be credit unions, mortgage lenders or brokerages, among other organizations. For guidance on how to navigate our choices, I consulted a few experts. Here's their advice:

1. Identify Your Banking Needs. "Hammer out a list of things that are important to you," suggests Jesse Ryan, managing director at Accounting Principals. "Is a checking account important? A savings account? Are you looking for investment opportunities? A mortgage? Loan consolidation? Direct deposit? Insurance?"

David Barr, a Federal Deposit Insurance Corporation spokesman, adds: "If you're a small business owner and going to be taking a lot of loans out, you might be more interested in what the bank has to offer on the lending side as opposed to deposit services."

2. Consider Convenience. Some financial institutions have branches, while others only exist online. Some have loads of ATMs, others have very few. So you need to think about how you bank.

"Large banks tend to have an advantage here," says Suzanne Martindale, a staff attorney at the nonprofit Consumers Union, best known as the publisher of Consumer Reports. "But advances in technology have made it possible and more cost-effective for smaller banks and credit unions to offer robust services as well, including online banking and decent ATM network coverage."

"If you feel comfortable enough going electronic, you can probably get some benefits there," says Ryan. "The company itself isn't paying for a bricks-and-mortar location -- no rent to pay, no staffing fees -- so they may not charge you for other services, or maybe can offer a better rate."

3. Review the Fees. According to Martindale, different financial institutions employ different fee structures. "Although large banks do typically provide ways to waive monthly fees, you are more likely to find free checking options at smaller banks and credit unions," she says. "As large banks look to recoup the billions of dollars in lost revenue from overdraft fees [and other fees], they may increase account fees for their basic checking accounts. Smaller banks and credit unions, by contrast, did not rely on those fees to the same extent for their revenue."

About those overdraft fees: Some financial institutions charge them to process a transaction when a customer spends more than they have in their account. While banks are no longer allowed to automatically charge them -- consumers must "opt in" for the service -- it's still important to be aware of what your bank charges for overdrafts, and to think carefully about the pros and cons of using the service.

4. Shop Around. "It's best to avoid making a categorical assumption about a particular type of institution," advises Martindale. "Rather, consumers should take the time to find an institution that best meets their individual needs. A combination of online research and a quick trip to a few banks and credit union branches to ask questions should do the trick."

5. Make Sure the Institution is FDIC-Insured. The FDIC is an independent agency created by Congress to "maintain stability and confidence in the nation's financial system" by regulating financial institutions. Specifically, it monitors and supervises them to make sure they are healthy and adhering to the law. It also insures our deposits so that we will can get our money back if the financial institution gets into trouble.

"Since we began insuring banks in 1934, not a single customer has lost a penny of insured deposits due to the failure of a bank," notes FDIC spokesman Barr. "From a safety standard, there's not a safer place in terms of where to place your money. If the bank fails, FDIC is there and we find another bank to take it over for us and from the standpoint of the deposit, it is business as usual for the customer."

In light of the many bank failures in recent years, it's worth reviewing exactly what that FDIC guarantee covers. (Between 2000 and 2004, only 24 U.S. banks closed. Since February 2007, more than 325 banks have failed.)

FDIC insurance
guarantees deposits up to $250,000. However, not all accounts are insurable. For example, the agency guarantees checking accounts, saving accounts, and certificates of deposit, but not stocks, bonds or mutual funds. Additionally, not all financial institutions are insured. There are over 5,500 FDIC-insured institutions, and most are easily identifiable, as they have signs in their branches indicating as much. To be on the safe side, you can use the agency's "Bank Find" to locate an FDIC-insured institution near you.

To learn more about how best to use your checking account, click here. If you want to switch where you bank, here are tips on how to do so safely.

Loren Berlin is a columnist at DailyFinance.com. She can be reached at loren.berlin@teamaol.com. You can follow her on Twitter @LorenBerlin, or become a fan on Facebook.

Increase your money and finance knowledge from home

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

Forex for Beginners

Learn about trading currencies and foreign exchange transactions

View Course »

Add a Comment

*0 / 3000 Character Maximum

26 Comments

Filter by:
mastercraftmyers

Does anyone know which Banks in America are the worst??

June 28 2011 at 7:21 AM Report abuse +1 rate up rate down Reply
1 reply to mastercraftmyers's comment
vcgh2000

The ones who don't pay taxes?

July 02 2011 at 1:36 PM Report abuse +1 rate up rate down Reply
laverneous

A new study by The Tax Foundation, a Washington, D.C.-based nonpartisan educational organization with a reputation for independence and credibility, states that the credit union tax exemption is “an unjustified $31.3 billion tax break”

June 27 2011 at 5:11 PM Report abuse -1 rate up rate down Reply
steadicam9

All Banks Suck and all Bankers must Die or go to Prison to be ass Raped as thay do to us all thay do is Lie Cheat and Steel.I will never use a Bank cant Trust them Credit unions are the way

June 27 2011 at 12:40 PM Report abuse rate up rate down Reply
ingrahamkaren

Many things that may make your banking experience more successfull are 1. Go right into the office. 2. Ask questions, for example while in the hospital my account became overdrawn, when the clerk found out she automatically deducted the $34.00 overdrawn amount, because I was a bank member in good standing, and had a legitimate reason for this occurance. Because of a multiple unfortunate reason, I was unable to open an account, but month after month I went to Chase Bank for a year or two to cash my checks. After a while, the Account Service Person asked me if I would like a Second Chance Account. Now I have my checks automatically deposited and also have just opened a Savings Account. Thank you Chase Bank for all you have done for me.

June 26 2011 at 7:20 PM Report abuse rate up rate down Reply
savemycountry911

The right bank in a credit union and even they don't pay the interest they should.

June 26 2011 at 5:09 PM Report abuse -1 rate up rate down Reply
darinw40@mail.com

it's a no brainer...F%^ the banks and join a Credit Union...less fees and better service and less profiteering/rudeness from oversized ahole banks

June 25 2011 at 8:30 AM Report abuse rate up rate down Reply
mjohn67610

I hate banks !! They are just a bunch of overpaid jerks (not the tellers) They have led us down the path of destruction.
Go to a credit union and boycott these clowns. It will allow us to get back to normal. How can they pay such excessive salarires and bonuses to incompetent people. Let them all rot in hell--bankers deserve tis final resting place

June 24 2011 at 9:09 PM Report abuse rate up rate down Reply
1 reply to mjohn67610's comment
kv37

I worked in a bank and I can assure you they are not paid very well. Banks have everything figured out to the dime and that includes what they pay their people. Also, banks are federal institutions and are not alllowed to have unions. Banks of course take full advantage of this and keep wages to a minimum.

June 26 2011 at 4:20 AM Report abuse rate up rate down Reply
lfriscofog

What good is a Bank if they dont pay anything on your savings and wont loan you money when you need it keep your money in cash form secure and close to home.Banks take but dont give anything.When dealing with cash dont tell anyone about your money they dont need to know about it.

June 24 2011 at 6:56 PM Report abuse +2 rate up rate down Reply
Trudy Marie

How about the BANK OF MATTRESS???

June 24 2011 at 6:10 PM Report abuse +2 rate up rate down Reply
1 reply to Trudy Marie's comment
savemycountry911

Our money would be safer in a hollow tree. Too bad inflation would rob even that.

June 26 2011 at 5:10 PM Report abuse rate up rate down Reply
JANE BAIRD

One thing was missed in this article. Choose a bank that's lending friendly.....can't find one? Me and everyone else either. Banks also just want your money. They don't care about you personally.

June 24 2011 at 6:06 PM Report abuse +2 rate up rate down Reply