Bank & Credit Union Buying Guide
Getting Started

If you’re like a lot of Americans, you have a checking account at one of the nation’s three largest banks: Bank of America, Chase, and Wells Fargo. Together, these giant banks hold about 32 percent of all U.S. FDIC-insured bank assets, and they provide many benefits such as big branch networks, state of-the-art digital banking platforms, and sophisticated security systems.

What We Found

In our survey of more than 72,000 Consumer Reports members providing over 96,000 ratings of their banks and credit unions, the three biggest banks tended to score lower than many other institutions.

It’s not because their services were poor—in general, our members were satisfied with them overall. Rather, our survey showed that there are meaningfully better banking alternatives at nearly 90 banks—including some that operate mostly online and credit unions.

For example, two newcomers to the ratings top our list of banks and credit unions—First Republic and Michigan State University Federal Credit Union. USAA and Schwab Bank still top our list of online banks. HSBC continues to be our lowest rated bank. A company spokesman says the bank has made changes since the period covered by our 2017 summer survey and continues to work on improvements.

If you’re happy with the services and fees at your current bank, you are fortunate. But if you are looking for an alternative, you have plenty of options. Here’s how to find the best institution to meet your banking needs:

Shop Around
At some banks, if you have eligible checking and savings accounts at the same bank with combined balances of, say, $20,000, $50,000, or more, you may get extra benefits. Those benefits can include preferred interest rates, fee discounts, and added rewards on savings, mortgages, credit cards, and brokerage accounts that you open. But when you buy any “product bundle” that contains a number of services rolled into one offering, it may be hard to know whether the total costs and benefits of the package deal are better than the same collection of services bought separately from multiple different providers.

You may save money by shopping around for the best deal at different financial institutions. That’s what many Consumer Reports members in our survey did. A third of those in our sample told us they had a second bank or credit union. One leading reason: Some 38 percent of our respondents who banked with multiple institutions indicated that they were able to get better rates for some services and products at institutions other than their primary bank or credit union.

Among our surveyed members, online banks like Ally, Capital One 360, and Discover were especially popular for savings accounts, while Synchrony was popular for certificates of deposit (CDs).

Key Bank Products and Services

How can you get the best service and the lowest fees? Follow this mix-and-match plan for maximum savings: 

Checking
A checking account is the engine of household personal finances, and financial institutions of every size–from the biggest banks to small community banks to national and local credit unions–typically offer most, if not all, of the key services and technologies you need. Those include online and mobile banking, direct paycheck deposit, debit card access to your money through nationwide bank-owned or fee-free ATM networks, online bill payment, remote check deposit using your smartphone, fast digital person-to-person (P2P) money transfers online and by mobile device to almost anyone, student checking, and health savings accounts. One service you may not need is overdraft protection, which can cost you a fortune in fees.

If you want the high satisfaction and advantages of a credit union, look for one that is a member of a national ATM network, such as the Co-Op system of nearly 30,000 fee-free ATMs and more than 5,600 shared branches. Make sure it provides online and mobile account access. Our survey found that credit-union customers were among the most highly satisfied overall.

Start your search by checking the websites of the credit unions we rated (available to subscribers) to see whether you’re eligible for membership. If you don’t qualify for any on our list, go to the credit union locater of MyCreditUnion.gov to find one that you can join. Comparison shop by following the links to the credit unions’ websites.

Certificates of Deposit
Compare interest rates for CDs at the online banks we rated. On 12-month CDs, for example, Ally, Capital One 360, Discover, and Synchrony were paying 1.75 to 2.05 percent annual percentage yields (APYs) in March 2018, vs. 0.02 to 0.10 percent by two major banks in New York. The best deal for the amount you plan to deposit and the period of time for which you invest will vary based on the institution.

Also comparison shop online at websites such as Bankrate and DepositAccounts, which collect rate data from thousands of banks and credit unions. But be careful when reviewing search results on such sites: Banks that don’t necessarily have the highest CD rates but advertise on the site might get top position. So scroll down the list to check for better rates. Neither of these websites includes every CD issuer.

Auto Loans
Choose a credit union for a car loan because those institutions often offer the lowest rates—another good reason to join one.

For example, credit unions were charging only 2.79 percent on 48-month new car loans on average in the fourth quarter of 2017, while banks were charging 4.64 percent, according to the latest comparison by the National Credit Union Association, using data from S&P Global Market Intelligence.

Get prequalified by a lender before you shop.

Credit Cards and Mortgages
Shop online if you are looking for a credit card or mortgage because the market for these products is national. You don’t want to limit your options by confining your search to, say, the bank where you have a checking account.

For credit cards, use a comparison site such as CreditCards.com. For credit cards that pay cash-back rewards, use Consumer Reports’ Credit Card Adviser comparison tool. For mortgages, go to HSH.com. But check other sites to broaden your search. Bankrate provides rates for credit cards and mortgages, as well as auto loans and CDs. And if you’re a member of Costco, be sure to explore the rates its mortgage lenders offer.

Brokerage Services
While banks push their own investment services, shop first at one of the higher-rated investment companies according to our most recently published survey in 2015. Such companies include Vanguard, T. Rowe Price and USAA.

Prepaid Cards
If you want a prepaid card for use in addition to a bank account, check Bluebird, offered by Walmart and American Express, or Liquid, offered by Chase. We found both of them best among 20 reloadable prepaid cards rated in 2016 because of their low fees and terms that are favorable to consumers. And both do much of what a checking account does. 

Paper Checks

Despite the ubiquity of electronic banking and our increasingly cashless society, consumers still write a lot of paper checks. But you don’t have to buy checks from your financial institution. Instead, we found bargain prices at Costco and Walmart. Check the prices online at those two retailers and compare them with the cost at your bank or credit union. 

How to Switch

It’s not always easy to switch banks. That’s partly because many people have their checking, savings, and other accounts linked together at one bank. Ironically, convenient banking features, such as direct deposit, automatic bill pay, and other services, also make it more difficult to switch banks, because it requires more work to activate those services somewhere else. And bank-account closing fees, rules, and other hassles are big enough obstacles that most folks find it easier to just stay put.

But it shouldn’t be that way. Consumers Union, the advocacy division of Consumer Reports, has called on Congress and the Consumer Financial Protection Bureau to make it easier for customers to transfer funds, sign up for automatic bill pay service, and set up direct deposits to new accounts. Consumers Union also wants banks to eliminate unfair fees for closing accounts and to be prohibited from reopening closed “zombie” accounts.

But until regulators take action, here’s how to switch banks as painlessly as possible:

1. Open a New Checking Account
Temporarily treat this as a secondary account at your new credit union, online bank, or smaller regional or community bank without closing the existing one. For mostly Internet banks, that’s a relatively easy online process; for others, the process may take 30 minutes to an hour and require an initial deposit of $50 or less. 

2. Move Direct Deposit of Your Paycheck
Contact your employer to accomplish this. It may take your employer a few weeks to get your new bank information into its system. Direct deposit may also make you eligible for free checking. To get the new account up and running fast, you could use your old bank’s online or mobile banking bill pay service, or the new “Zelle” P2P money transfer service, to transmit funds to your new account. Or simply write a paper check to withdraw money from your old account and deposit it into the new one, but see steps 3 and 4 first. 

3. Stop Automatic Bill Payments
This can be easily done via the Internet if you’ve been using the bank’s online bill pay feature, where you control when so-called “push” payments are sent out. If you auto-pay by authorizing a payee to “pull” the payment from your account, you’ll need to contact the company and follow its procedures for stopping payment. Then we recommend that you never use the “pull” method again so that you retain complete control of your account. 

4. Keep the Old Account Open
Be sure to keep your old account open until the last check you wrote has been cashed and has cleared. 

5. Set Up Additional Account Features
Familiarize yourself with the digital features you need at your new institution and activate them. That includes services such as online bill pay, mobile banking, P2P money transfers, and alerts.

6. Close the Old Account
Kiss your old bank goodbye by visiting your home branch in person. Zero out any remaining balance by having the old bank electronically transfer the funds to your new account or by obtaining a cashier’s check or cash. There should be no fee to close accounts you have had for more than a few months. 

Bottom Line

There are more banking options than ever so, don’t tolerate unpleasant or overpriced banking services. By upgrading to a better financial institution that matches your needs, you could save hundreds of dollars per year in fees, earn higher interest rates on savings, and pay lower loan rates, while getting better customer service. And you probably won’t have to give up all the digital convenience of using ATMs, banking online, and managing your accounts from your smart phone because even small community banks and credit unions now make these services available.

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