Ask Yourself These Questions Before Choosing A Bank

When I moved from the Chicago suburbs to New York City this past fall I switched from Clarendon Hills Bank - the small bank in my hometown - to Citibank, partly because my mom suggested it, and partly because there's a branch basically under my apartment building.

And although the switch has worked out fine, I now realize I could have done a little more research. More than a few times I've forced myself to walk the 15 minutes from the office to the nearest Citibank ATM - and I'm usually standing right next to a Chase ATM.

When you're looking for a place to put your livelihood, you should consider your options before settling on one.

Nick Clements, cofounder of MagnifyMoney, helped narrow down the questions I would have been smart to ask myself before switching banks.

1. Will I pay fees to open a checking account?

Clements gives one very simple rule when it comes to checking accounts: "Everyone should have a completely free checking account. Your goal is to have a free place where you can get your salary paid, and where you can make your monthly bill payments."

Clements identifies three potential fee traps:

1. Monthly fees. "Most banks will allow you to have a free account in the sense that you don't have a monthly fee as long as you meet a minimum balance requirement, or you have a direct deposit into your account from your employer," Clements explains. Ask about the minimum balance you must keep in your account to avoid fees. If you don't think you'll be able to stay at or above the minimum, consider having your employer pay you through direct deposit, which Clements says is the easiest way to have monthly fee waived.

2. Overdraft fees. Clements says that even though most people focus on monthly fees (which is why banks usually find a way to waive them), banks made nearly $32 billion in overdraft fees last year by charging people who tried to spend more money than they had in their checking accounts. Overdraft fees are usually easy to avoid: Either decline overdraft protection for your account, meaning your bank won't spot you extra funds or charge you for the privilege, or keep a close enough eye that you don't spend more than you have in the account.

3. ATM fees. Which brings me to the next question ...

2. Does the bank have ATMs located near my home and office?

If you choose to go to an ATM not owned by your bank, it will cost you. "If you don't go to the ATM within the network, you will end up being charged by your bank for going out of the network, and then you'll also be charged by that other bank," Clements says. "So if you bank with Chase and you go to a Bank of America ATM, Chase would charge you and Bank of America would charge you. So you could end up spending $5, $6, or $7 just to use an ATM."

Make sure the bank you choose has plenty of ATMs located near where you live and work. That way you'll have the convenience, but you won't be paying for it.

3. Will I be living abroad or traveling abroad frequently in the near future?

Casual, occasional travelers generally won't need to take their travel into account when choosing a bank, but those headed for an extended stay in another country will have to give it some thought.

"If you are living overseas, then there are really only two banks that offer fully integrated expatriate banking services," Clements explains. "They're HSBC through its Premier account, and Citibank through its international executive banking program."

If you're just traveling abroad, Clements recommends getting a credit card that doesn't charge foreign transaction fees and foregoing using your debit card - and thus, your checking account and bank - altogether.

4. How often do I go to a bank branch to work with a banker?

Clements says that most people often don't need to deal with a banker at a branch. "Typically what you need a human being at a branch would be if you have a lot of cash that you need to deposit, like if you're someone who's a waiter or a waitress and you get a lot of cash tips and you need to do something with that cash, or if you need to get a check issued by the bank."

If you find you generally don't need to visit a branch, you might want to think outside the brick-and-mortar box. Clements says online banks (banks that have no actual branches and operate entirely through the internet) are the cheapest option and offer the best value.

5. How much interest will I be earning if I open a savings account at this bank?

If you're planning on opening a savings account, how much money you'll be earning in interest should be something you take into consideration. "With a savings account, your objective should be to get the highest interest rate possible," Clements says.

This is an area where online banks shine. "At Citibank, they're paying .01% on savings. Bank of America, Wells Fargo, they're all at that same .01% interest rate," Clements explains. "If you went to an internet-only bank, they're paying anywhere from .9% up to 1.05%."

Clements points out that your savings account should really only be a place to keep funds that you've set aside for emergencies or other goals, so earning interest on a savings account isn't always a priority. However, as long as you're opening one, you should still compare rates from bank to bank.