How to Choose the Right Bank For You

The cost of changing banks is minimal in dollars, but significant in time. Therefore, most consumers switch banks only due to life change events (marriage, change in residence, change in job). The common giveaways of toaster ovens and stuffed animals have been replaced with more expensive gifts like free theater tickets to encourage customers to make a switch. The actual process of closing an account and opening one with a new bank is not difficult. However, the more banking services you use and the more active you are with your account — i.e., paying your bills online, direct deposit of your paycheck, etc. — the greater the inconvenience. Furthermore, you should be wary of any incentives and be sure to understand the benefits and costs of any new bank you are evaluating.

Right for You?

If you are a young family with two children, a big, national bank may be right for you. You are likely confronting life's big issues — buying a home, saving for your children's education, saving for your own retirement and possibly financing your own business. A national bank offers a myriad of products, from credit cards to IRAs, which address all of these needs. In addition, the option of online bill payment may be the perfect solution for your hectic schedule. Although the fees may be higher, the major conveniences may be worth the cost.

If you are a retired couple, a regional bank is most appropriate. If you are retired, you are probably not as concerned about saving for education, securing a new mortgage or saving for any of life's early situations. You are likely going to value the personal service you can receive at your local branch. In addition, you are less likely to need all the services of the bigger national banks, including the access to online bill payment.

If you are single, young college grad, an Internet bank may be your best choice. Typically, young college graduates have more debt than assets, so a bank with a low minimum balance requirement is a good place to start. According to, Internet banks require less than half of the balance that brick-and-mortar banks demand to avoid monthly service fees. Also, college grads rely heavily on ATMs. Internet banks seldom charge their customers a fee for using another bank's ATM and also often reimburse their customers for any charges incurred from another bank.

If you are a double-income couple with no children, either a regional or national bank may be right for you. It is more a function of your time, which is a key determinant for your choice. You may be willing to take the additional time to search for the best price on individual financial products and could therefore benefit from a regional bank.

On the flip side, your work life could be very demanding, requiring you to travel and leaving very little free time for making some time-consuming financial decisions. Therefore, a big national bank may be the best choice.

E-mail Mellody with your personal finance questions.

Mellody Hobson, president of Ariel Capital Management ( in Chicago, is Good Morning America's personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributed to this report.

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