You probably think you know your banks. Most people take out an account in their younger years, with the help of their family or loved ones. But what’s familiar doesn’t always make the most financial sense. The best banks are those that meet your particular financial objectives.
Those objectives depend on the person, of course, but typically it comes down to investments, fees, convenience, and accessibility — criteria the best national banks and best credit unions tend to meet. In this compilation, we’ve pieced together some of the strongest choices when it comes to your financial life. Take this as a starting point for you to put together a portfolio for a solid financial future.
The 5 Best Banks and Credit Unions of 2020
- Capital One: Best for Millennials
- HSBC Bank: Best for Savings
- Alliant Credit Union: Best for Low Fees
- Ally Bank: Best for Online Banking
- Charles Schwab Bank: Best for Travelers
|Financial Institution||Max. Savings APY||Max. Checking APY||Min. Deposit||Key Benefit|
|Capital One||1.80%||0.20%||$0||Credit-monitoring with Creditwise®|
|HSBC Bank||2.05%||0.01%||$1||World-wide network of ATMs and branches|
|Alliant Credit Union||1.65%||0.45%||$0||Alliant will cover checks, electronic payments and transfers that won’t clear due to insufficient funds (but you will have to pay it back, plus a fee)|
|Ally Bank||1.70%||0.50%||$0||High-interest checking and savings accounts|
|Charles Schwab||0.18%||0.15% (linked to brokerage account)||$0||Easy access to world-class investment and trading opportunities.|
What is a Bank or Credit Union?
So, what is a bank or credit union, exactly? The question is more complicated than you may think. After all, not every organization that holds your money is technically a bank. Moreover, not every lending organization is a bank. While these may be related financial service businesses, they don’t fall into the same category.
Banks and credit unions offer a range of financial services. They take deposits, pay interest on accounts, offer investment products and loan money. You may get a mortgage or a personal loan through a bank, but it’s unlikely you would get these through an investment broker. The same is true of a mutual fund or CD — you may get them through a credit union, but probably not through a mortgage lender.
Many people have several products with a single bank or credit union. However, before diversifying or shopping around for a new financial institution, it’s a good idea to know how these products differ.
Banks vs Credit Unions
On the surface, banks and credit unions seem similar. But there are key differences. Credit unions are nonprofit, while banks are for-profit organizations. As a result, banks tend to have higher fees and offer less favorable interest rates on loans and deposits. The flip side is that banks may have a larger network of ATMs, better technology and a wider variety of products.
Credit unions have specific criteria for membership. You may have to have a common employer, attend the same church or otherwise share the affiliation upon which the credit union is built.
As for the safety of your money, both banks and credit unions usually insure accounts up to $250,000. That’s through the Federal Deposit Insurance Corporation (FDIC) for banks and the National Credit Union Administration (NCUA) for credit unions. However, this coverage isn’t always a requirement. So before you an open an account, check that the institution actually carries this insurance.
Banks vs Investment Brokers
While a bank can sell investments, it is quite different from an investment broker. The latter has a very specific role. Typically, an investment broker buys and sells stocks on the New York Stock Exchange (NYSE) or the NASDAQ. To trade these stocks, the broker must be licensed and be a member of the exchange. Stock market investing is a high-risk activity, as the value of publicly traded companies tends to fluctuate. Brokerage firms may have a variety of products, but tend to serve clients with high-risk profiles. A bank, on the other hand, can offer a wide variety of potential investments, including low-risk term deposits and savings accounts.
Banks vs Mortgage Lenders
Mortgage companies specialize in one product: mortgages. Therefore, they don’t offer the range of loan options that you might have with a bank. You can’t go to a mortgage company to buy a home and get a car loan, for example. Mortgage companies may not even fund the capital that backs the loan. Some merely sell the mortgage and then get funding from banks or other entities. Mortgage companies can be a solid option for many homebuyers, but many people choose to stick with their bank, which might offer them good rates if they have a solid history as a client.
The 5 Best Banks and Credit Unions
Capital One: Best for millennials
When it comes to Capital One, you might be drawn in by the coffee. This bank has literally made the neighborhood cafe part of its network, with various locations where clients (and non-clients) can sip a cup of joe while thinking about their financial futures. Capital One cafes have on-site personnel to answer questions about accounts, investments, loans and everything you need to know. At the same time, Capital One has built up its online presence. It offers a satisfying experience for tech-savvy millennials who want the convenience of banking on their smartphone or desktop.
HSBC Bank: Best for savings
If you want to build up that pool of reserve cash, look no further than a simple savings account. HSBC is a global bank that can help you up your savings game. There’s no ATM access — so little temptation to spend — and you may incur a fee if you take the money out during the first six months. So with those barriers in place, you can take advantage of the low minimum deposit of $1 and the competitive interest rates. The bank offers a few different accounts, some with tiers so that the more you save the more you earn.
Alliant Credit Union: Best for low fees
Remember that note about credit union having less prohibitive fees than banks? That’s clearly on display with Alliant. It offers ATM fee rebates and low rates on credit products like VISA cards. Alliant is an insured credit union, so you have a sense of security that your money is safe, in addition to not wasting away to fees. The institution is also convenient for members, with online, mobile and phone options. The brand makes a promise to return emails within one business day, and you can always pick the up the phone and call if you have questions.
Ally Bank: Best for online banking
Ally is an online-only bank, so it would make sense that it’s one of the best banks for customers who want that full virtual experience. Even though there are no branches, Ally has a large ATM network, with access to your accounts. Ally lets you invest as well as accomplish daily banking needs. It may pose a bit of a hassle if you want to deposit cash since you can’t, but otherwise is an all-around good option for people who want to save money at competitive rates. Accounts have no monthly maintenance fees and no minimum balances.
Charles Schwab Bank: Best for travelers
When it comes to ATM rebates, Charles Schwab goes one step further than other banks and refunds ATM surcharges from machines around the world. Those rebates are unlimited. If you travel frequently, you know how much those fees can add up, and take away from your available cash when you’re moving from place to place. Of course, there’s a small catch: in order to get a bank account with Charles Schwab, you’ll have to have a brokerage account with them as well.
The Final Word
Everyone needs some kind of bank, but choosing the right one depends on your lifestyle and what you want to do with your money. If you hate seeing fees deducted from your account, look for transparency on those charges before signing up. If you need frequent ATM use, look for that kind of accessibility. The bottom line? Make a list of your preferences and find the best bank that matches your needs. It may be the personal touch of a cup of coffe, or the security of knowing your money is sitting in an account somewhere, earning interest for a rainy day.