Finding a bank is like choosing a pair of shoes: You want the right style and size at the right price.
Before you settle on a place to bank, it’s smart to know what your options are. There are more choices than you might think.
Among the things that can help you decide are the range of services you need, how convenient it will be to manage your money day-to-day, and whether you’re getting a good financial deal.
As important as your decision is, though, you’re not making a lifetime commitment. If you’re not happy with the level of service a bank provides or if you think the fees are too high, you can always close your account and take your money someplace else. Making a switch is easy, and there’s no charge.
THE BIG PLAYERS
If you live in or near a large city, your choices may include one or more large national or regional banks whose names are recognized around the world.
These institutions serve individuals and businesses at hundreds, and sometimes thousands, of branches. In addition to a variety of checking and savings accounts, they typically offer extensive investment services, a full range of loans, multiple ATM locations, online banking, and automatic bill payment.
But convenience has a price tag. Charges for basic and special services are often higher than you might pay at local banks or credit unions. And you may need a minimum balance of several thousand dollars to get free checking and ATM use, a reduced rate on credit cards or loans, or the best interest rate on your savings account.
KEEP IT LOCAL
If you’re looking for more personal service at a better price, you might want to check out community banks. They offer checking and savings accounts, the standard array of loans, and sometimes full-scale investment and online services.
Local banks are more likely to have weekend and evening hours than national or regional banks. Plus, their minimum balance requirements for free checking and ATM use tend to be lower, and their fees and other charges may be lower as well.
But there can be limitations. Local banks typically have just a few branches. If there isn’t one near your home or office, it can be inconvenient to handle transactions you have to do in person or get cash without paying to use another bank’s ATM.
If you have the opportunity, you might consider joining a credit union— a cooperative, not-for-profit financial institution created by a company, labor union, community group, or other organization. Each credit union sets its own eligibility requirements, which you have to meet if you want to join. For example, you may have to work for a company to be eligible for its credit union.
If you do a little research, you may be able to find a bank that offers special deals to students, new customers, or to the new employees of their corporate and not-for-profit clients. It can pay to ask around. And you can get help finding a credit union by calling the Credit Union National Association (CUNA) at 800-356-9655, or going to www.cuna.org.
TWO FOR ONE
You might consider using two banks—one online and one local. That way you get the advantage of 24-hour access and reduced fees while keeping enough cash in a local bank for ATM withdrawals. If you’re having your paycheck directly deposited, you can split the deposit between the two in whatever proportion works for you. And if you need a bank check or a signature guarantee, the local bank can provide it.
Credit union fees and loan rates are usually lower, and the interest rates they pay are usually higher than their for-profit competition, making them the most economical place to bank. And they have a reputation for being more friendly.
The potential limitation is the range of services. While larger credit unions offer most, if not all, of the accounts and services you need, smaller ones may have limited choices. And many credit unions have just one office and are open only limited hours.
You can also do your banking with banks established by brokerage firms, insurance companies, mutual fund companies, and other financial institutions.
Some of them are non-bank banks, which offer only deposit services— that is, checking and savings accounts but not loans. Others offer everything a traditional bank offers, and then some: a variety of checking and savings accounts, ATM and debit cards, electronic bill paying, online account access, and more.
If you’re already doing business with a financial services company, one-stop money management can be extremely convenient. And you may get better rates and pay lower fees than at other banks.
But there are some potential drawbacks. You may need to have a fairly large minimum balance, and since most non-bank banks don’t own their own ATMs, you may end up paying cash withdrawal fees to use other machines. However, some non-bank banks refund those fees up to a monthly limit.
The newest banks are virtual banks, which exist only online and have no bricks-and-mortar branches. Some are full-service, while others offer savings and investment products plus mortgage loans but not checking accounts. Virtual banks typically charge lower fees and pay higher interest because of low overhead.
With virtual banks and the online services of bricks-and-mortar banks, you can check your transactions in real time, as they happen, rather than at the end of the banking day or the end of the month.
Like non-bank banks, virtual banks don’t have branches or own ATM machines, so you’ll have to make deposits electronically or by mail, and pay ATM fees for using other banks’ machines. To cover that expense, some online banks reimburse you for a certain number of ATM withdrawals each month.