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On a list of financial tasks that are prime targets for procrastination, open a new bank account ranks pretty high for a lot of people. You may have last gone through this process in college. Or maybe your parents opened a bank account in your name even earlier. In these cases, the banking inertia you feel can be significant. But, over time, banks can subtly evolve in ways that could actually make a difference to you.
For young adults, overdue financial planning or a major life event can spark interest in finding a “better” bank account. But what would a better bank really mean?
For a newly married couple, a new bank account can help them manage their money more efficiently as a household. For others, ditching an old bank account can help develop better savings habits, give them access to better technology, or earn higher annual percentage returns (APYs).
Are digital costs and benefits the only consideration?
When young adults think about what they want from a bank, many people’s minds automatically focus on financial punishments or rewards. You may remember your frustration with the low account balance charges you incurred. You may also think fondly of the returns from those savings accounts that exceeded what your friends said they earned.
Younger generations may never have particularly valued a long-term relationship with a specific banker at a specific neighborhood branch. Instead, the majority may want to minimize fees and maximize how their money works for them while they’re in a savings account.
The many online banking articles and listings that compare this banking data encourage this kind of transactional thinking. After all, while you’re unlikely to switch banks more than once every 10 years, you want to make sure you’re getting the best deal available right now.
Think beyond the numbers
Even so, any dissatisfaction with your current bank can remind you that rates and fees change over time. This reality can give importance to secondary considerations, beyond the figures, even if they have even less weight. In the past, you may have favored a credit union that provides superior service and terms to its members. Or you may have given a benefit to a bank that plays a complementary role in your financial life, such as servicing your mortgage.
Technology has become an increasingly important consideration over the past decade, especially among Gen-Y and Gen-Z consumers. As bank customers accustomed to managing a large part of their lives via their smartphone, they expect a user-friendly mobile app which supports day-to-day financial management.
Moreover, many third-party financial apps make users more aware of their real-time financial situation. It’s easy to see, with a simple click, how your bank is treating you, in the form of fees or limitations that seem exorbitant or unnecessary.
The role of financial psychology
The introduction of online banking has played an outsized role in reframing the bank selection process for many young adults. This breed of bank avoided the overhead that well-known banks incur from having so many physical locations.
As a result, online banks such as Ally and Mark can extend benefits to customers who may prove too costly for their traditional competitors. But first, these banks can (unintentionally) force potential customers to think differently about their banking preferences and habits.
Many Millennials and Gen Z consumers can happily trade a physical bank branch for higher returns on their savings accounts. But still, some hesitations may remain: What if you miss or regret not having access to a physical bank branch? For example, someone who earns a large portion of their income in cash may need to be able to go to a bank to deposit money into their account.
Regardless of the specifics, however, this dynamic underscores that a “better” bank means different things to different people. Ultimately, where you open accounts shouldn’t just be about rates and fees.
Allow your behavior to work in your favor
The realization that you need to evaluate banking options based on your strengths and weaknesses is as empowering as it is obvious. Few people are likely to want a bank that performs terribly on just one key metric. But maybe strict overdraft fees aren’t a deal-breaker if you’re someone who reliably keeps a sufficient cushion of cash in your bank account.
A critical element of overall financial stability is related to psychology and behavior. That doesn’t mean you always have to make flawless decisions. If you can recognize how you are most likely to go wrong, you can choose banking products and services that work in the exact framework you need.
Your “best” bank account reflects how you live your life
For the sake of discussion, let’s assume that you will continue to try to limit the time you spend opening new bank accounts. If this is true, the temptation to simply choose the bank with the highest current savings interest rate will always be there. But the surest path to satisfaction – and spending the minimum amount of time change bank— in the long run only takes one or two more steps.
In short, it is a balance, a combination of quantitative and qualitative factors. You may never accept rock bottom savings account performance, but you may be willing to trade off for a benefit that you personally find useful. You were undoubtedly a very different person when you started using a bank account in high school or college. If you want your new account to reflect the way you live your life today, you need to recognize what you value in a bank beyond the key numbers.
Find the best online banks of 2022
Identifying the best bank account for you is a process: a process that takes into consideration not only the services, tools and APYs offered, but also your specific needs, goals and habits. While you can clearly benefit from reading an unbiased analysis of the best online banksUltimately, the best online bank for you is a very personal decision. Make your choice based on what you know about the bank or credit union and what you know about yourself as a bank customer.