BRADEN SMITH is a Finance undergraduate with a major interest on banking and personal finance. He enjoys spending his time towards school and his blog.
Many people new to banking will ask themselves “How do I choose a bank?”. Don’t worry, we’ve got you covered. We’ll explore everything from evaluating a bank’s reputation to understanding the different fees that banks charge.
A Bank’s Reputation Counts
Some banks are known for their great services and products, others have a shady past. It’s important to know who can be trusted, and who can’t. Search here for complaints related to various financial institutions and find out what they’re doing to help their customers. This can be a good indication for how well the bank handles issues that customers have. Reading detailed non-bias reviews can be helpful for understanding what each bank does good and bad. Placing emphasis on non-bias because some websites are compensated by individual banks to write intriguing reviews.
Unfortunately, not all banks are created equal, and some have a sketchy history including fraud, laundering, and theft. But that doesn’t mean that you shouldn’t bank. Consumer regulatory procedures are set in place for the safeguarding and accountability of deposits and accounts.
Location and Access
The convenience of strolling into a neighborhood bank and making a deposit can be a pleasant experience, but not all banks have physical locations. Some banks operate entirely online, while completing all banking transactions over the internet. ATM and branch locations should be noted, while this allows customers to have easy access to their money and professionals alike.
Many banks will have locator tools right on their website, making it easy to find branches and ATMs nearby. This can reduce the cost of paying ATM fees.
Since each person has different banking preferences, it would even be a good idea to make a phone call to the bank and ask them about what’s offered at each location. Some banks have financial advisers you can speak to, while others may only have tellers and managers. It’s best to learn about the location you would frequent before committing to a new bank.
Make Money Through Banking
Many banks will reward customers in the form of interest for keeping money in their account. Banks tend to use terms like ‘High interest savings accounts‘ or ‘rewards accounts’ to describe a product that incurs a small interest paid to the account holder over a set amount of time. By default, many banks and credit unions will not offer a high interest rate. On average, banks pay about 0.06% interest on money sitting in savings and checking accounts.
By shopping around and looking for the best rates, some banks will offer up to 1.85%. Some banks may require a minimum balance within the account at all times to earn interest. High interest savings accounts are setup to keep in-line with inflation, and ensure that money is always appreciating.
Each year, inflation is about 2%, meaning that the spending power of $1.00 is $0.98, one year later, requiring more money to buy the same things.
Online and Mobile Banking
As technology is attracting more and more people, banks must adapt to consumer habits. They do this by implementing 24/7 online and mobile banking platforms for people to use anywhere in the world. Accessing a bank online and through an app can be an easy yet convenient way of performing a wide variety of banking functions. Many banks will have an online platform which allows account holders to make transfers, check balances, and much more. Check out the 2018 online banking guide for more information.
When learning how to choose a bank account, it’s best to find a bank that offers online and mobile banking if you use a smartphone or computer on a daily basis.
Mobile and online banking safety is important and demands that the user and platform are doing everything to rid of unauthorized access. Through various methods of improving consumer security like two factor authentication and installing an anti-virus, account holders can make sure their banking information is safe. Find out more about the safety of online banking.
Insurance on Deposits
When we must choose a bank account, it’s very important to determine if our money is safe. In the case in which a bank fails, regulatory agencies will step in and bail out the account holders. Most banks have affiliation with the FDIC (Federal Deposit Insurance Corporation), meaning that consumer depository accounts (not investment accounts) are insured for a minimum of $250,000. This also goes for credit unions, in which the NCUA (National Credit Union Administration) will insure accounts for at least the same amount.
Could you imagine losing everything in your account because a bank went under? The government tries its best to protect consumers through these entities.
Since the bank will be handling your money, customer service should be one key feature to look for when choosing a bank account. Banks may offer live chat, phone, e-mail, and ticket support to ensure customers are always taken care of. Online only banks may not offer in-branch support and may only take phone calls or live messages to resolve issues. This is an important factor for when deciding if online only or local branch banking is the right fit for your needs.
One question that you should ask when choosing a new bank: Does my bank offer flexible hours for when I may need them the most?
Banking hours vary from location to location, and online hours may not be 24/7. Before ultimately deciding on which bank you choose, it’s best to determine what hours of the day you operate in. If you’re a night worker and rarely get to see daylight, 9:00 am to 5:00 pm customer service hours may not be an ideal fit. Only about a third of the big banks offer 24/7 banking support, and normally operate within a 9:00 am to 8:00 pm EST schedule.
Understand the Fees
Unexpected fees, charges, and expenses can make people angry and leave their current bank. This can be avoided by understanding the fees and what may happen in certain situations. Note that some accounts may have an attached monthly fee or minimum balance fee. While there may be perks to owning an account like this, one simple mistake could cost a decent amount of money.
Some fees are unavoidable, like those that the account holder may incur if too many savings account transfers are made. Learn more about this U.S. Government mandated rule.
As long as paper money is still around, banks will keep charging higher and higher ATM fees. This unwanted cost could lead to hundreds of dollars spent per year on withdrawing cash. To combat this, some banks may reimburse checking accounts for up to $25 per month. Banks have deals with one another, allowing for account holders to recoup the money they spend on the charge. On the other hand, some banks may not offer this perk.
In the situation where you’ve spent more than you had in a particular account or transferred too much money, the bank would charge a fee for the account going into a negative balance. To avoid this ($33 on average) fee, banks offer overdraft protection, which ensures each account is kept in good standing. Overdraft protection would cost the account holder about $10, in which the bank will give a small loan of the money owed.
Imagine being charged $33 for spending $1 more than you had. Leaving your account -$34. Avoid this with overdraft protection.
There are even some mobile applications and online services that can be used as an overdraft protection, instead of using the bank. Dave is one of the most popular services on the market, allowing people to borrow up to $75.00 without any interest expenses. This means if you overspent, and your account balance is now -$20.00, Dave will lend the entire negative balance at no cost. This can be great for people who love to save money.
Banks and credit unions offer a wide variety of different products, from checking accounts to mortgage loans. When making the journey to choose a new bank account, it’s best to find a bank that offers products that suit you, and your lifestyle.
Many banks offer discounts and exclusive offers for when clients open more than one account and have a history with the bank.
While banks are in the business of making money, they try to offer useful tools and tips to help each customer succeed at banking. USAA for example offers a car buying service for members, and partners with companies to offer great and affordable travel deals to the customers they serve.