MANYBanks

Start with deposit insurance

Banks and savings associations are insured by the FDIC, and most credit unions are insured by the NCUA through the National Credit Union Share Insurance Fund. Both protect deposits up to $250,000 per depositor, per insured institution, for each account ownership category, backed by the full faith and credit of the United States government.

Ownership categories, including single, joint, trust and certain retirement accounts, are insured separately, so a married couple with individual and joint accounts at one bank can be covered for well over $250,000. Insurance protects deposits, not investments: stocks, bonds, mutual funds, annuities and crypto assets are not covered, even when a bank sells them.

Verify coverage yourself instead of trusting a logo. Look up the institution’s exact legal name in the FDIC’s BankFind tool or the NCUA’s Credit Union Locator. Some banks run several brands under one charter, and deposits across those brands count together toward a single limit.

Match the account to the job

Most households need at least two accounts: checking for spending and bills, and savings for money kept apart.

One naming trap is worth knowing first. A money market deposit account is an insured bank or credit union deposit, while a money market fund is an investment, usually held at a brokerage, that FDIC and NCUA insurance does not cover.

• Checking accounts handle debit card purchases, bill payments and direct deposits, and usually pay little or no interest.
• Savings accounts pay interest on money you don’t plan to spend, and some banks still limit monthly withdrawals.
• Money market deposit accounts are savings accounts that may pay tiered rates and allow a few checks or debit transactions.
• Certificates of deposit lock in a rate for a set term, with a penalty for withdrawing early.

Compare the fees you would really pay

Fee schedules run long, but the handful of charges listed below do most of the damage. Ask for the account agreement and fee schedule before opening, and note the condition that waives each fee, such as a minimum balance or a monthly direct deposit.

Federal rules also help. A bank or credit union can’t charge an overdraft fee on ATM withdrawals or one-time debit card purchases unless you have opted in to overdraft coverage for them, and without that opt-in those transactions are usually declined instead.

• Monthly maintenance fees and the balance or deposit rules that waive them.
• Overdraft and nonsufficient funds (NSF) fees, and whether linked savings can cover a shortfall instead.
• Out-of-network ATM fees, which can be charged twice, once by your bank and once by the ATM owner.
• Fees for sending and receiving wire transfers.
• Foreign transaction fees on card purchases made abroad or with foreign merchants.
• Charges for paper statements, check orders and early account closure.

Read the APY, not just the rate

The interest rate is the base rate an account pays. The annual percentage yield, or APY, also reflects how often interest compounds, so it shows what a balance would earn over a year. Federal Truth in Savings rules require banks and credit unions to disclose the APY, which makes it the fair number to compare.

Then check how the rate is earned. Some accounts pay the advertised APY only on balances within a tier, only for an introductory period or only in months when you meet activity requirements. A rate that drops after three months, or applies only to the first few thousand dollars, can be worth less than a lower rate that holds.

Branch bank, online bank or credit union

Branch banks offer in-person help, easy cash deposits, cashier’s checks and often safe deposit boxes, though their savings rates tend to be lower. Online banks often pay higher yields and charge fewer fees because they don’t run branches, but depositing cash can be awkward.

Credit unions are member-owned, not-for-profit cooperatives that often charge lower fees and offer competitive loan rates. You must qualify for membership, usually through where you live, work, worship or study, a relative who belongs or an association you can join. A small number of state-chartered credit unions are privately insured rather than federally insured, so confirm NCUA coverage before you join.

Know when an app is not a bank

Many popular money apps are technology companies, not banks. They keep customer money at one or more partner banks, and FDIC insurance protects those deposits only if the partner bank fails, not if the app company itself fails.

Even then, pass-through insurance has conditions. The bank’s records must show the money is held on behalf of customers, and the app or its partners must keep records showing exactly how much belongs to each person. If those records are wrong or an app collapses, getting your money back can take months even though no bank has failed. Before keeping money in an app, get answers to these questions.

• Which bank holds my money, and is it FDIC-insured?
• Is my balance held in a way that qualifies for pass-through coverage?
• Is any part of my balance swept into investments that deposit insurance doesn’t cover?
• How quickly can I withdraw everything?

Switch without missing a payment

Open the new account before closing the old one, and leave a small balance in the old account for a month or two to catch any payments you overlooked.

• Open and fund the new account, and order a debit card or checks if you need them.
• Update direct deposits with each employer or benefits payer.
• Use recent statements to list every automatic payment and bill-pay payee, then move each one.
• Download old statements and tax forms you may need later.
• Wait for outstanding checks and pending payments to clear.
• Close the old account in writing and keep the confirmation.