You are spoilt for choice when it comes to financial institutions and their services. The financial industry is changing, and previously, lesser entities are emerging as the favorable options for different types of consumers. The internet has aided the development of various online fin-tech solutions that are offering people better services and lots of conveniences.

For an ordinary individual, this wealth of financial options seems to be a great thing, but some might be overwhelmed by all of them and even find it hard to pick a suitable one. Well, finding a reliable one should be easy if you are informed about all these options.

There is no perfect bank as the best one depends on your needs, expectations, and current situation. This piece will enlighten you about some crucial things surrounding banks to help you find a reliable one. Read on;

What Is A Bank?

The financial industry has changed in recent years, and it has become harder to distinguish a real bank from other financial institutions. A bank is a financial institution mandated to receive deposits and give out loans.

They might also offer additional services such as wealth management, currency exchange, and safe deposit boxes. Most countries have a central bank formed by the government that regulates all these smaller banks.

Bank Safe Deposit Box

History of Banks

The banking concept can be dated back to 2000 BC, where the first prototype banks were run by merchants who gave out grain loans to farmers and traders in various cities in India, Greece, and Assyria. The banking history is intertwined with monetary history.

Grain and cattle were the primary forms of exchange in the early days, and as currencies were developed, banks also changed and started taking monetary deposits. These early bank-like systems were keen on records of people making trades in a log and those receiving loans.

The first proper banks might have started in Mesopotamia where proper lending was done to farmers who repaid the seeds they received when they harvested their produce. The most significant changes in the banking structure came into the fray around the 17th century, specifically in London.

The Goldsmiths of London is a notable example, and it had a collection of vaults where people would store their materials and pay for these services. The Goldsmiths began to dish out loans over time.

The Bank of England was the first to produce notes, which were initially promissory. After a while, they started to offer cheques, overdraft, and regular banking services. This was a significant swing in the banking revolution and can be credited for shaping the modern-day banking system.

After World war 2 in the 20th century, banks started to emerge in various parts of the world. They began to lend money to countries, and retail banking became the norm. Most of the technologies, such as ATMs and SWIFT systems, were developed back then.

Understanding Banks

Banks can be categorized based on different criteria, and one major way of doing so is by looking at their work and the entities a particular one serves. Based on this, we can categorize banks into three types which are;

  1. Commercial banks.
  2. Investment banks.
  3. Central banks.

Commercial Bank

Commercial Bank

This is a financial institution that aims to make profits by offering consumers loans and allowing deposits from the public. These are the regular banks that we go to for our financial needs. They can be public or private.

They facilitate the dealership of foreign currency by facilitating their buying and selling. They are profit-oriented organizations and earn their money by providing a wide variety of services to the public. Here are some roles of commercial banks;

  • Receiving deposits.
  • They offer loans to the public.
  • Credit creation.
  • Agency functions.
  • Utility functions.

Investment Banks

These are different types of banks that manage the purchase and sales of bonds, stocks, and other investments. Their clients are companies that want to make initial public offerings. They act as managers for deposit accounts belonging to businesses.

They are financial middlemen hat negotiate mergers, find debt financing for companies, and oversee corporate reorganizations. They also advise some of these clients.

From the features of these three types of banks, it is evident that you will mostly be interested in commercial banks if you need one to make deposits and get other financial services. Central banks deal with the other banks, and investment banks are for the corporates.

This way, it is essential to understand the differences and types of banks before making your choice to ensure that you do not waste time finding out more about a bank that does not deal with individuals.

Central Bank

This is an apex body that controls and manages the banking system operations. It regulates the money supply and is responsible for the economic stability of a country.

The central bank is a monopoly and is owned by the government due to the critical role it plays. It is often referred to as the banker of commercial banks and government. Some of the functions of this bank include;

  • Note printing authority.
  • Supreme banker.
  • Holds monetary authority.
  • Nation’s gold and foreign exchange reserve.
  • Country’s clearinghouse.
  • Lender of last resort.

Check out our best bank comparisons:

Types of Banks- Further Classification

1. Cooperative Banks

These are either retail or commercial banks that offer a wide array of financial services to clients. They stand out from the rest in that they are either local or community-based entities. Some of them are structured to serve a particular group of people, for instance, those working in a specific niche such as doctors, teachers, among others.

They are different from banks and typically offer low-cost loans and financial services to these people. In the US, they are same as the credit unions, and most of them are not profit-based. They are only set up to cater to the interests of the target group.

Cooperative Bank

2. Savings and Loans Associations.

These are not banks literally but offer financial services that make them a notable option. They are dubbed thrifts or S&Ls. These are financial institutions that use deposited funds from members to provide mortgages, refinance loans, and provide other users loans.

Some of them are more sophisticated and offer additional financial services. Several years back, these entities were the same as cooperative organizations since members earned high interests on their savings compared to the regular banks. However, their rates have since been regulated by the relevant authorities to ensure fair competition in the financial niche.

3. Online Banks

These are banks that are purely based online. They have brick and mortar premises, but these are not meant to serve the public. They are designated to the people running the bank to manage their operations.

Most of them offer microfinance services and allow customers to make limited deposits and get small loans. Online banks have few restrictions and are increasing in popularity as people are turning online for most of their needs.

Check out our reviews on the best online banks available right now:

Services offered by Commercial Banks

We make a mistake and only relate banks to the deposit and withdrawal services they offer. Well, these are the main services, and they provide many others. Read on and find out;

1. Loan Advancing

Banks operate to make a profit. They do this by offering loans to the public and then charge interest on the amount paid back over time. The type of loans could be short-term, medium-term, or long term.

2. Overdraft

Banks offer overdraft facilities to customers. This is a service where one is allowed to withdraw more than they have in their deposits. Interest is charged on the overdrawn amount depending on the rate and time it takes to pay back.

How To Find The Best Bank

3. Discounting Bill of Exchange

This is a common form of lending offered by banks. In this method, an individual holding a bill of exchange has it discounted by the bank. This way, the debtor accepts the bill drawn upon him by the bill holder and agrees to pay the amount when it matures.

After making some deductions, the bank pays the value of the bill to the holder. Once the bill matures, the bank gets its money from the party which had accepted the bill.

4. Payment of Cheques

People who own accounts in banks are given cheque pads depending on the type of account they hold. They can draw cheques and use them to pay bills and people. Banks facilitate this and pay the people who receive these cheques after verification and official procedures.

5. Exchange of Foreign Currency

Banks sell and buy foreign currency. They exchange foreign and local currency, which help to settle dues in international trade.

6. Consultancy Services

Modern banks are evolving and offer many more services than what we are accustomed to. They hire financial, legal, and market experts who advise customers regarding several issues such as trade, tax, and investments, among others.

7. Remittance and Transfer of Funds

This is the leading service offered by banks. Members of the public are allowed to remit money from their accounts and transfer it to different ones.

8. Credit Cards

Banks offer different types of credit cards to customers. One can purchase goods and services in exchange for the provider paying for them immediately, through the credit card. The cardholder promises to pay back the amount accrued over a while with some interest.

9. ATM Services

Automatic Teller Machines eliminate the need to visit a bank hall to make deposits, withdrawals, and make account inquiries. They are available in various points and work 24/7.

Bank ATM Services

10. Debit Cards

These are given to customers to allow them to withdraw money from their accounts electronically. They require a Personal Identification Number as authorization and are mainly used in ATMs and points of sale.

11. Online Banking

This is a service offered by banks that allow users to transact via the internet. It is also known internet banking and traditional banks are being forced to include these services, lest the emerging fin-tech organizations surpass them. Customers can perform account queries, funds transfer, credit card applications, and bill payments, among others.

Online banking is somewhat related to mobile banking, which is another service. Through M-banking, one can perform transactions using a mobile device but not necessarily over the internet. They do this through USSD or a Personal Digital Assistant.

12. Private Banking

These are the services offered to high net worth customers. These are individuals that have large deposits and are provided wealth management services, albeit privately.

How To Choose The Best Bank

Present and Future Needs

One mistake that we make when selecting a bank is doing it based on our current needs and situation. Try and foresee how your position will be like in the next couple of years. Changing banks is a pain that you should avoid, and this can be done by picking a bank that will cater to your present and future needs. For now, you could need a bank to deposit your paycheck, but is this all you will require in the future?

Look at your growth potential and consider whether or not you will outgrow the institution. Another angle is looking at whether the bank excels in the services that you will need in the future, for instance, online payment services, payment gateways, and business banking services.

If you are looking to get a mortgage, will it be willing to offer you one and does it have discounts to existing customers? These are some of the things to assess as things change, and it is wise to plan.


The interest rates and bank charges are the other things to look at when shopping for a bank. If your earnings will be deposited to that bank, it helps to check the transaction and maintenance fees. They should be as low as possible.

How To Choose The Best Bank

A difference in the interest rates is not very crucial since the additional amount won’t have any significant effect on your financial situation unless you are dealing with triple figures. However, monthly maintenance fees and overdraft penalties can seriously dent your accounts, making you lose hundreds of dollars every year.

If you are planning to borrow money from the bank at some point, look at the rates they are offering. It is good to borrow from a bank that you hold an account in since they have your history and won’t subject you to stringent checks, but options are aplenty today with the rise of online lenders and credit unions that offer slightly better rates.

Type of Bank

If you are not well versed with the details in the banking sector, it is easy to liken all banks and think that they are similar. Well, you can choose from several types of banks, and even if all their services are closely related, their differences still stand out, and you should know them.

The big banks are the household names you are familiar with and have several branches all over the country. Their operations are national and at times, multinational.

They are characterized by a plethora of services and will offer you all you need from a bank. However, their fees may be a little bit higher, and their bank locations are widespread if you are keen on personal banking.

Local banks serve smaller areas and are focused on the community. The services offered are enough for most middle-class people, but the rich and big businesses might be too big for them. They charge reasonable rates for their services and branches are accessible locally.

Credit unions are community-focused, and you need to qualify as a ‘member’ before holding an account with them. The services are tailored to small businesses and consumers. Their fees are very low, and they offer better rates on savings.

Read our guide to find out more about CD vs Savings Account: Which Should You Pick?

Types of Bank

Online banks have emerged as a notable option, and one can hold a purely-online account. They are not suitable for people who still rely on physical banking. Most will offer to check, and savings accounts with the bigger ones offering additional products such as loans and overdrafts. Their fees are low, and branches are non-existent

All these banks have their advantages and disadvantages, and analyzing them will help you to pick the best. However, banks are going online, and it is easy to find one that has the features of a big, local, and online bank in one.


We live in a digital age, and you need to move away from banks that are still stuck on the legacy systems. A bank should offer you convenient banking options. One notable thing to look at is whether you can make remote deposits. This will avoid the need for going to a banking hall every time you want to make a deposit.

How do they handle bank to bank transfers? Can you do them online?

We all get busy, and it becomes hard to check on our accounts. With the rise of cyber-crime and fraud cases, it helps if your bank can regularly send alerts in case anything happens in your account. Automatic text and email alerts make banking easier.

ATM and Branches

Legacy banking systems are being wiped away, but it is still necessary to get a bank that has accessible branches and ATMs. If you have any issue with the account, you will need to visit a bank branch, and if it is far away, this will inconvenience you.

Some people are more comfortable sorting out their issues via a one vs. one conversation, and here is where physical bank branches come in handy. ATMs give you another option for accessing your money when you cannot do it online and ensure that your bank has a couple of them in your area.

Frequently Asked Questions

Chase Bank

Will I pay fees to open a checking account?

Checking accounts should ideally be free. The idea is to have a place where you can get your salary paid and make your monthly payments. However, banks will have a few traps that will make you pay for having that account;

Monthly fees are the first trap, and most banks will let you have a free account as long as you have the minimum balance requirement. Always ask about this minimum balance to avoid these fees and consider having your employer pay you through direct deposit to avoid the fees.

Overdraft fees give banks a lot of money, and this is why they find it easy to waiver monthly fees. It is simple to avoid these fees since we pay it willingly. One way is to decline overdraft protection for your account or to ensure that you spend what you have.

Always analyze the various fees that come into question as you can avoid some of them and make your checking account low maintenance.

Do I have to withdraw money from my bank’s ATM?

This is an extension of the third fee trap, which is the ATM withdrawal fee. Well, you need to pay for the convenience of withdrawing money round the clock. If you choose to use an ATM owned by your bank, it will cost you a little amount. However, you can withdraw money from another bank’s ATM, but you will pay more.

Your bank will charge you for going outside the network, and the bank that owns the ATM will also charge you. Always ensure that your bank of choice has plenty of ATMs in your area to avoid paying a lot for withdrawals.

How often do I need to visit a bank branch to work with a banker?

With the increased popularity of online banking and widespread networks of ATMs, you might not need to visit a bank branch as long as everything is working fine. Typically, you should visit if you need to deposit a considerable amount or if you need to get a cheque issued.

Most disputes with bank accounts can be solved online, and you do not have to visit a branch. It all depends on your activities with the account as regular deposits and withdrawals can be done without visiting a branch.

How much interest will I get if I open a savings account with a bank?

This widely varies with the bank and specific features of the saving account. It is an important consideration since you would want to get a bank that offers the highest interest possible on your savings. Most notable banks such as Citibank and Bank of America offer .01 % on savings.

Banks that provide higher rates will have restrictions on the account by giving a minimum deposit threshold and only allow you to make limited withdrawals.

My Top Recommendations

Chase Bank

This is a banking giant in the United States with several sign-up bonuses to help you get going with your account. It has locations and ATMs all over the US. Its accounts come with fees that are reasonably easy to avoid, but the downside is that the interest on checking and savings is relatively low.

Promotions will give you an additional $200 for a checking account and $150 for a savings one. You can avoid the charges by maintaining minimum deposits and using direct deposits on your checking accounts.

Bank of America

This is another banking giant that offers a wide variety of banking services with the only limitation being the low-interest rates. It has about 4300 branches across the US. Their customer services are easy to reach, and you can get help online through their twitter handle @BofA_Help. The interest rates on checking and savings accounts are low, and you can easily sidestep all the banking fees.

Discover Bank

This is an online bank with high returns on deposits and savings. It has a strong network of over 60,000 ATMs, and you get 1% cash back on qualifying debit card purchases up to a limit of $3000 per month. This bank does not charge monthly fees and has no minimum deposit requirements.

Top Banking Mistakes To Avoid

Banking has its share of advantages, and you need to get your interaction with it right to avoid pitfalls. Most of the bad experiences people have with banks are as a result of mistakes that you can avoid. Here is a list of top banking mistakes to steer clear of;

  • Avoid paying bills manually as this could lead to late payments, and penalties will start accruing. Set up an automated request to have your bills deducted automatically. Make an effort of logging to your account and checking that bills have been paid in good time.
  • Most of us tend to lean towards the national banks and forget the smaller banks. Always look at the options and analyze the fees, services, and reputation of small banks as they could offer you a better option.
  • It is easy to skip the fine print when picking a bank and get overwhelmed by the fantastic features. Banks have a way of introducing policies that work against us subtly, and if you are not keen, these policies might haunt you. Always analyze your banks fine print and know what you are signing up for.
  • Paying for a checking account is a huge mistake as it should not be happening. Most banks will set fees on checking accounts but offer you ways of sidestepping these fees. Try and live within your means and avoid paying for a checking account.
  • Signing up for overdraft protection is good, but it tempts you to live beyond your means. Most banks will charge between $30 and $40 for every overdraft transaction, making it a costly thing to sign up. An overdraft can save you from a financial crisis, but the fees rack up quickly. Cancel your overdraft protection and learn to live within your means.
  • Most people do not monitor their account activity. This is a huge mistake as it makes your account prone to fraudulent cases. Always monitor your activity and point out errors early enough to help the bank correct them.


Banking is not as complicated as you might think, and it all depends on how well you understand how it works. It is easy to find a suitable bank if you know what all the terms mean and what you are signing up. The secret to finding a reliable one is stating your needs and then trying to find one that will suit you.

It does not have to be the bank with the most number of customers in the US or the one with the most number of branches, but even a credit union in your area could turn out to be your perfect fit. Take your time since a bank has a significant impact on your financial affairs, and pick one that is good for you.