So a little about me and this article before you get started. I was a bank teller at a Mid-sized bank in Oklahoma for five years (I left in the middle of 2021). Among that time I was a teller supervisor for two years. Over the years I have been a customer at many different banks and even credit unions. Since I no longer work at a bank, I have no loyalty or personal affiliation to any one of them. This article isn’t to give me sales or rewards. It’s a cumulation of my knowledge and personal experiences to give you the best information possible to choose a bank that fits your needs. Too many people are afraid of the banking system or feel they’re being used by it. So they end up under-banked and even putting their financial future in jeopardy because they do risky and expensive practices and activities like keeping uninsured cash in a residence, paying high fees just to cash checks as a non-customer of a bank, and making tons of non-refundable, commercial-business-backed money orders, all in the name of trying to stay away from having a bank account. My hope with this article is to give some peace of mind and make you, the customer, more confident in choosing a financial institution that you feel treats you the way you should be treated.
Having been a bank teller gives me a different perspective than most people on what’s acceptable with banks and what’s not. What you may not know is that there are a LOT of factors that actually matter when choosing a bank. A lot of people look at bank savings rates as the primary factor. However, in the grand scheme of things, unless you plan to put at least $10,000 in savings, rates hardly matter. You’re usually looking at a few dollars or cents difference annually. Not, in my opinion, a reason you should choose a bank.
What does matter is the bank’s size, and there’s a bunch of reasons why. There are truly about four sizes of banks: the Mega-size global bank, the Large-sized national bank, the Mid-sized regional bank, and the Small-sized community bank. For this article I won’t comment on global banks as a whole because I don’t have any experience with them, and for the most part, a lot of these banks are based in other countries like China. However, there are a few here in the U.S. like M&T bank.
So, let’s get started. National banks like Bank of America, Wells Fargo, J.P. Morgan Chase, etc. These banks are incredibly well known, and they have a vast amount of coverage in states around the U.S. The larger the bank is, the more likely they have a direct account with the Federal Reserve. This matters because wire transfers and foreign currency are acquired by the Federal Reserve. That means if you need items or transactions like these, the closer your bank is to the source of the Federal Reserve account, the faster you can get what you’re asking for. There’s of course a price for convenience, however. The dirty secret many larger banks have is that they are sales heavy and charge as many fees as they possibly can. They didn’t get big by accident. And for regular fees, they sometimes charge higher rates than other banks.
Most large banks have a standard of $34-$36/item. However the highest I’ve seen is $38.50/item from M&T Bank. This may seem fairly standard, but when realizing they don’t actually have to charge that fee at all, we realize that’s quite high and a bit unreasonable. However, that isn’t all. Many of these banks have “usage fees.” For instance, debit card usage fees, which you need to look out for. Many are a monthly charge, but I came across a bank the other day that literally charged a debit card fee of $1.50/transaction. If this is your bank, I would switch immediately. Debit cards, in my book, should be a free service. The merchant already pays a fee when you run your card. Your bank asking you to pay again is just excessive.
There’s also banks who charge a monthly fee for use of the teller staff. You should never have to pay a fee just to do a transaction with a teller in person. And the list goes on. These are fees that, I as a former teller, would close an account over. I’m not saying you have to do the same, but know what you’re being charged for and don’t allow your bank to take advantage of you. Many times people bank with national financial institutions because they’re everywhere and the hassle is limited. If they move, they probably won’t have to close their account and find a new bank. But you also usually pay for that convenience. So the real question is: How much are you actually willing to pay for that convenience?
The second size I’ll address is the small size bank. This is the exact opposite side of the spectrum from large sized banks. Often small banks try to make themselves as appealing as possible because they don’t have a lot of customers, so they value everyone who banks with them as potential for revenue. For this reason, the staff usually is very personable, free accounts are almost always available, and fees are usually minimal, with the exception of “standard” fees like dormant fees, overdraft, NSF, etc. Small banks also usually have a lot of programs that mid and large sized banks do not, such as old checkbook shredding.
While small banks are often the best at making their customers feel comfortable and appreciated, there are some negatives too. The first is that their size makes them not as aware of risk and fraud as other banks. Often times their community reach is rather limited, so they may institute policies to help customer satisfaction that larger banks would not, out of risk experience. However, because small banks are so small, they are hyper aware of the fraud knowledge they do have, so they often do things like holding new account checks for the entire 7 allowed business days, even after it’s cleared the other bank in some cases.
Also, another big downside to banks that have few branches is that they are easily acquired by other, larger banks. It isn’t uncommon in the case of small banks to start an account with one bank and for them to get acquired by another bank a few months later, thus making you a customer of the new bank. When I banked with a small bank just as described, it was acquired twice, which meant my account was put into the system of two entirely new banking institutions that I didn’t have any information on or prior knowledge of. Despite their many draws, this often makes smaller banks not quite the right fit for a lot of people either.
This brings me to the Mid-sized bank. If you remember the story of Goldilocks and Three Bears, Mid-sized, or regional banks are kind of like the “just right” in that story. The reason I say this is that they often are big enough to have a lot of features that large banks have, but they aren’t so large that the customer doesn’t matter to them. Often times these banks are big enough that they find themselves competing for customers with large sized banks, so they make themselves as appealing as possible, without taking as many risks.
This often means lower and less fees than large banks and the availability of free accounts and free services. Mid-sized banks also have a huge community obligation to the footprint they’re in, so often times you will see city events or even large complexes funded by Mid-sized banks. You may even see two Midsized banks working cooperatively on projects such as large community events, charities or the building of new software. Often times Midsized banks have the internal struggle of wanting to stay local and accessible and wanting to expand. This sometimes means that they struggle between being customer friendly and wanting sales. In recent years with COVID, some Midsized banks have tended more towards sales and lost their customer friendly nature, which is a shame.
But don’t discount them just yet. Mid-sized banks are often more stable than small banks in that they usually are the ones acquiring smaller banks and probably will not be acquired themselves. They also have more risk and fraud experience than smaller banks because they have a wider market. That means smaller hold times, next day funds availability for new accounts usually, and better training for their staffs. This means they’re less likely to pass on counterfeit bills and cash fraud checks, which keeps you and your money safer. They also usually have good information security and are in-the-know about scams and ID theft attempts, just as Large size banks would be.
So, what about the online banks though? Both Capital One and Ally do not charge overdraft fees. Capital One is also listed near the top of nearly every JD Power financial list because of it’s largely good practices, which may surprise you considering they’re so well known for their credit cards. Online banks can be great, and often they make themselves very appealing because they don’t have much of a physical presence in most places. This lack of physical presence can be hard for some people because you don’t have that human interaction where if you have a problem, you can just go to a branch and ask someone a question. Some people love the online feature of these banks, though. And often these tech savvy individuals are not the type that would walk into a bank branch anyway, so everyone has their perfect thing.
With that said, only you know what bank is right for you. Some people prefer to use banking services like Chime rather than keep a physical or online banking account. What you should know is that these services are backed by real banks, which means they have to follow real Federal banking regulations and rules, just like the rest of them. Make sure to do your homework. What features are most important to you? Only you know the answer.