Posted on Friday 16 July 2021
When was the last time that you’ve opened up a new bank account? Whether it’s your first time or if you’re ready for a change, choosing the right bank account is crucial. Having the right bank account can set you up for success in meeting your financial goals – and the wrong account can easily send you backwards. Whether you live in Hamilton or some other place, a proper bank account can make a huge difference.
There is no shortage of options when it comes to bank accounts (and even banks themselves). It pays to do a little research on financial institutions and the kinds of accounts they offer. That means getting crystal clear on your financial goals, your needs, and digging into the rates and terms attached to each type of account to see how they match up.
After all, it’s your hard-earned money – you deserve the chance to have it managed in the best way possible!
If you’re looking for guidance on how to pick the right bank account, you’ve come to the right place. In the sections below, we’ll tell you everything you need to know about choosing the type of bank account for your personal finances.
Before you even start looking at accounts, you’ll want to make sure that you’ve got the right bank. Generally speaking, there are three different types of banks: brick-and-mortar, credit union, and online. Let’s look at each of them below to help you pick the one that works best for your needs.
A brick-and-mortar bank is a traditional bank that has an actual, physical location that you can visit. Like a bank you can walk into like let's say in Oshawa somewhere. Most traditional banks have multiple locations and a wide variety of banking services outside of checking and savings accounts, such as credit cards, mortgages, personal loans, business loans, and more.
You might want to opt for a brick-and-mortar bank if you want the option of sitting down face-to-face with an account rep to discuss your banking options.
Of course, one thing to consider about traditional banks is that having physical locations means that they’ve got to pay for rental space, electricity, and water. Those overhead costs could translate to higher costs for banking services, such as account management fees, overdraft fees, ATM fees, and more.
A credit union is like a traditional bank in that they have physical locations and offer a wide range of banking products, but there are a few key differences. First, credit unions tend to have a smaller footprint, with fewer in-person locations to choose from.
Second, credit unions are owned by members and classified as a non-profit organization. That means they are exempt from government taxes and can pass on those savings in the form of lower rates and fees for members. Those savings are a key driver for choosing a credit union instead of a traditional brick-and-mortar bank.
Not only are credit union accounts often more affordable over the long-term, but their smaller footprint often means more personalized service and a focus on developing relationships. For many credit union members, that community atmosphere is a big differentiator.
If you want to join a credit union, keep in mind that not everyone can become a member – there are often eligibility requirements, which could include employment, residency, or pre-existing membership with another organization.
An online bank operates entirely online – everything from account representatives to mortgage applications to checking accounts are available through an app or a web browser.
While there is a trade-off in that you won’t be able to sit down face-to-face with a representative, online banks often have a competitive advantage. Without physical locations, online banks are often able to offer better rates for banking services and financial products, which is a huge win for banking customers!
If you prefer to manage your checking and savings account online, from the comfort of your own home – and don’t mind getting on a phone call or web chat to ask questions – then an online bank could be the right choice for you.
Now that you’ve got the type of bank that you want to sign up with, it’s time to choose your bank account. There are a ton of different options for checking and savings accounts, and picking the right one can make all the difference. Here are some examples of the types of bank accounts available at traditional banks, credit unions, and online banks:
A checking account is the most basic type of bank account. You won’t earn interest on the money that you keep in your checking, but you’ll also be able to access it at any time. And having a debit card will allow you to withdraw from ATMs and make payments as a credit card.
A savings account is designed to be a place where you can put money away safely and earn a small amount of interest. Standard savings accounts aren’t designed to help your money grow by a significant amount, but it’s often a great way to build an emergency fund.
Many savings accounts have limits on withdrawals, so you’ll want to make sure that you’re not taking money out of your savings account every week (which is really the point of saving, after all).
A money market account is similar to a savings account, but the interest rates are much better. You’ll earn interest on any savings according to current interest rates – so your rate will decrease and increase over time, depending on general market trends.
Some money market accounts will also come with a debit card or a checkbook, meaning you can use them just as you would a checking or savings account. Keep in mind that money market accounts often have additional requirements, like account minimums and withdrawal limits, so make sure you choose the account that works best for your financial goals and needs.
A guaranteed investment certificate (GIC) is a savings account that functions as a contract that you sign with your bank. In exchange for higher rates of interest that you earn on your savings, you agree to leave a certain amount of money in your GIC for a set period of time. In other words, you’re agreeing to give your bank a “loan” and they pay you back in interest.
Choosing between a checking account, a savings account, a money market account, or a guaranteed investment certificate is only the tip of the iceberg. Ultimately, the bank that you choose will have their own accounts with unique terms, features, and rates – so doing your research beforehand can really pay off in the decision-making process.
If you’re having trouble deciding on the right bank account for you, here are a few key questions to ask yourself:
No account is the same, and each type of account is designed to support different financial goals, needs, and even preferences on things like how often you can access your money.
Just remember: know your financial goals and make sure that you have a clear picture on the rates, terms, and requirements for the bank account you choose. Not only will this help you identify the right bank account for your needs, but it will also put you on the path to success in meeting your financial goals!