Knowing how to choose the right bank could save you a lot of money. As banks consolidate to lower costs, the days of George Bailey behind the counter at a small bank in Bedford Falls are less and less common. Small community banks do still exist, but if you live in an urban area, you may be limited to a choice of big banks, and even if you're in a small town, you'll find a tradeoff between the personalized service of small banks and the convenience of big-bank ATM cards. The process of figuring out how to choose a bank for your needs might seem difficult and confusing.
The first thing to do when choosing a bank is to identify the services that are essential to you. Do you want the convenience of electronic banking services more than anything? Are you looking for a bank that will maximize your savings? Does having a personal relationship with bank staff make you feel more secure? Make a list of your expectations before you start your bank search.
Check out bank Web sites or visit the banks in your area. One of the most important things to consider is accessibility, meaning you'll want to choose a bank that fits your lifestyle. Are the bank's hours acceptable to you? Is there a branch near your home or work? Are there multiple ATMs sprinkled around the places you regularly frequent? Do you need person-to-person service often? Does this bank provide the kind of service you will need at hours you can accept?
Bank fees
Bank fees are one of the biggest factors to consider, so prepare to read the small print in account offers. Choose a bank with the fewest fees to avoid. Look out for fees related to minimum balances, overdraft fees, fees for balance transfers and charges for using ATMs besides the bank's own machines. Some banks even charge for things like balance inquiries and seeing a teller. If you're looking for a checking account, find out if the bank offers overdraft protection and make sure you know the fees and penalties for bounced checks.
Most banks don't offer very good interest rates for checking or savings accounts, but thorough research will help you find a bank that does. You may want to take into consideration any interest-related perks offered if you plan on carrying a high balance in your savings or checking accounts.
If you're tech-savvy, you may want to choose the bank with the best electronic banking services. Check to see if the bank facilitates downloads to personal finance software and if there are fees for paying bills online.
Find out if the bank provides free online images of checks that you've written and know how long the images are available. See if the bank will let you link your bank accounts to provide protection from overdrafts. Look for free direct deposit of your paycheck as well. You can also get your tax refund and Social Security payments by direct deposit.
Bank alternatives
Credit Unions are an often-overlooked alternative to a traditional bank. Credit unions are smaller, community-based banks that often offer better interest rates because they don't have to pay stock dividends. While they usually offer fewer types of banking services and lack state-of-the-art electronic banking features, credit unions are quite competitive with commercial banks, providing branches, ATMs, lines of credit and basic bank services. If a family member qualifies to be a credit union member, you may also qualify.
Another alternative is an online bank account, either from an Internet bank or from a major bank that doesn't have branches in your area. While Internet bank accounts often offer higher interest rates and some handy electronic banking features, there are some drawbacks. First, you won't have the same ready access to cash that you get at a local bank. Second, finding a human being to resolve a service issue can be a challenge. Finally, your transactions might not clear as quickly through an Internet bank.
If you're thinking about an Internet bank, make sure it allows you to pay for daily expenses with a debit card and to pay bills with online bill pay. You should also keep in mind that Internet bank accounts are completely dependent on technology, so if your computer or Internet connection goes down (or even worse, if the Internet bank's server goes down), you don't have access to your money until the technical problems are fixed.
If you don't write very many checks and don't need many bank services, you may want to choose a bank that offers no-frills checking and savings accounts. These bank accounts usually have low costs and no minimum balances. These bank accounts are perfect for seniors and students.
If you might use your bank account for a mortgage, auto loan or home equity line of credit, make sure that your bank reports to the credit bureaus. Payment accounts provide an excellent foundation for a solid credit report, but not all lenders automatically report positive information to the credit bureaus.
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