Picking a bank is all about what’s important to you. It’s sort of like finding the right house – the community, the schools, the type of house, the HOA, the size of the lawn, the age of the house – all of these features & options are based on your preferences. Where you bank may not be quite as big of a deal, but it’s important to find one that is the right fit.
Are you looking for a business relationship with a banker? A lot of ATMs and branches? The lowest fees and best rates? An online bank? The best and sleekest technology? Maybe even a credit union? There are so many options available in the marketplace today. Let’s explore some of these questions to help you find the right bank.
1) Fees & rates. It’s fair to say most individuals look for a financial institution that has competitive products – meaning low mortgage rates and decent savings and checking account interest rates. In today’s low-interest-rate environment, a 30-year mortgage should be below 4% (it all depends on where the 10-year Treasury rate is trading at the moment though). You should review the Freddie Mac weekly mortgage survey for the average rates, then check those against the bank you have in mind.
Along the same lines, a bank should offer savings and checking account options that have a competitive market interest rate. Not long ago, when interest rates were above 0%, some stingy banks kept their checking account rates at 0% while you could safely earn 2% in the market. It’s not a big chunk of change, but it’s something to be mindful of. Check out depositaccounts.com for a list of the best savings and checking account interest rates out there. You can even keep your savings with us at TFC where we can find you the best ‘money market’ fund.
For fees, avoid banks that have a fee for everything. As the consumer, you are king. You should not have to get nickel and dimed for any little service or tiny mistake you make. Paper statements shouldn’t have a $10 monthly fee either! Pesky items like maintenance fees and ATM fees should be relics of the past in today’s tech-driven world.
2) Convenience. Maybe you just want a quick & simple way of banking. You are on the go with a million things to juggle in your life. ATMs, an online platform, a great app on your phone, and maybe even a human you can call if something comes up are a few things you want. In that case, a big national bank might be your best option since they have branches and ATMs all over the place and have services relatively stream-lined. Just know that you may be more susceptible to fees and the rates may not be the most attractive. And they may do their best to cross-sell and up-sell you on just about everything.
3) A business relationship and someone working for you. A credit union could be a great fit if you want people you can trust and a network within your community that won’t take advantage of you. Credit unions normally offer solid rates since they aren’t looking to maximize profits. The downside though is that they often don’t have the best technology nor the best online platforms. Another weak spot is they may not have a national presence if you move or travel frequently. The upside is you can walk into a branch and have confidence they are looking to help you. And if you are or were in the military, USAA is a great choice.
4) Online-only. Maybe you just want to do your banking 100% electronic. Online banking services like checking & savings accounts and mortgages all can be done through the web. You won’t have a human to interface with, but you can do it all from the comfort of your home while in your PJs on a Saturday morning! And since there is no brick and mortar bank building, the costs are low, and those savings are often passed to you. If you use cash quite a bit, this might not be a great fit since many online-only banks do have a vast (free) network of ATMs.
It’s important to always keep your checking and savings account in an account that is FDIC-insured. FDIC insurance covers up to $250,000 per account holder per bank. One caveat to this rule is if you have cash in a money market fund – that is not guaranteed, but it is extremely rare to see a money market fund deviate from $1 per share. What you don’t want is to park your emergency fund somewhere that is not safe. So do your homework on the security of the account you choose and with whom you bank.
As a refresher, an emergency fund is an account where you keep 3-6 months’ worth of living expenses set aside for a rainy day. It’s a matter of when a rainy day comes about, not if. Having a safety net of cash for an unexpected event like losing a job, a major house repair, or a sudden illness is an important piece of your risk management strategy.
Here’s the point
- Where you bank comes down to your preferences. Competitive fees & rates are often the biggest consideration for consumers, but maybe you are looking for a friendly face and strong business relationships that come with a brick & mortar financial institution. Perhaps a great website and cool app are important to you. Maybe you’re all about convenience.
- Be sure you put your emergency savings fund at a bank that has FDIC-insured accounts, or you might look into keeping your cash with TFC – we can find you the best low-risk money market fund to earn a competitive savings rate.
- There might be special perks to certain member groups of society – like the military. Also, maybe your employer offers special perks via a corporate credit union.
Action items
- Research current interest rates, the fee structure of a few banks, product offerings, and customer reviews, then consider what you want in a bank.
- Look into credit unions that are tailored to you since there might be added benefits.
- Sit down with us at TFC to talk about how an emergency fund plays a critical role in your long-term financial plan.
Featured Image: Photo by luxstorm from Pixabay