Forty-six percent of bank customers under the age of 55 said they would switch banks to gain access to better digital features. Are you one of that 46% looking for the perfect bank to manage your money?
Knowing how to choose a bank that’s right for you is essential. You should understand all of your banking options. What are the benefits and disadvantages of opening a checking account or savings account, and how can you get access to competitive savings rates?
Our guide goes through all the banking options you should consider when choosing the best bank account for your needs.
Read on needs so you can save money and take control of your finances with confidence. Find out here.
How to Choose a Bank
First of all, it’s important to understand that there are four main types of banks. We’ve outlined them below with a brief overview of their pros and cons. Before you choose a bank analyze each type’s benefits and drawbacks to make sure your finances are carefully cared for.
1. Large National, Multi-National, and International Banks
This includes the big banks, such as Chase Bank, Bank of America, and Citigroup. These are household names that advertise their services on television and radio. They have extensive branch networks and ATMs across the country. Overall, they provide great access to cash when you’re traveling.
While they have convenient locations and often no ATM fees, these large banks typically offer low incentives to customers. Checking accounts may come with fees but no interest payments. And savings accounts usually offer only minimal interest rates.
2. Online-Only Banks
Online banks including ING Direct and Ally Bank are great alternatives to multi-national banks. Their lack of physical locations helps them to reduce overhead costs significantly. This makes more money available to customers in the form of higher interest rates on checking and saving accounts, and better customer service.
If you don’t need to touch cash often or visit a teller, then online banks are a great option. They offer similar products with better interest rates. However, there are some drawbacks: fee-free ATMs may be difficult to find in rural areas.
Also, you won’t have the option of speaking with someone in person if you have a problem that needs addressing.
3. Community Banks
Community banks are the perfect option for those who like the feeling of personalized customer service. These are also the best options if you want to bank with someone that is invested in their community. These local banks may not have as many branches as big banks, but they still offer a wide range of services.
The advantages of going with a community bank include being able to build a relationship with them. This may lead to better deals and more flexibility in terms of overdrafts and other fees. On the flip side, they don’t offer as many products or rates as large organizations do.
They may also lack higher-level online banking features. Plus, their physical branch locations are fewer than bigger banks, making it difficult to find one while traveling.
4. Credit Unions
Credit unions are similar to community banks. They have one major difference: they are owned and operated by their members. This means that if you become a member, you actually have a say in management decisions.
That being said, most credit unions still maintain membership requirements like having to work for a specific employer or living/working/shopping in the area the credit union serves.
The pros of going with this type of institution include lower account fees and better interest rates on loans and savings accounts. They also offer more personalized customer service and greater loan terms flexibility.
However, there may be some downsides too, such as having to meet certain requirements to open an account and limited product types due to their size.
Also, since branches are unlikely outside of the credit union’s direct area, using online banking might not be as user-friendly or sophisticated as larger banks offer.
Cash Flow Banking—Another Consideration
Cash flow banking is a concept that can help you make the most of your money. By being your own bank, you can take advantage of the opportunity cost offered by each of your dollars and earn interest on yourself.
To do this, many people turn to dividend-paying whole life insurance policies—they offer safety and financial security while providing a steady stream of income.
Factors to Consider When Choosing a Bank
When it comes to choosing the right bank, there are several factors to consider. To ensure you make the best decision, here’s a helpful checklist:
Deposit Insurance
When selecting a bank, never do business without deposit insurance. The FDIC and NCUA offer insurance coverage up to $250,000 in case the institution fails. Banking without deposit insurance is risky and can result in a loss of deposits. To ensure financial security, it’s important to select banks with deposit insurance and do research on how to react if your bank fails or goes through other changes.
Fees
Banks often charge static and dynamic fees depending on your banking habits. Be aware of what balance you’re likely to maintain, the number of ATM withdrawals and checks written, and the amount in any savings accounts.
Fees to look out for include monthly account fees, overdraft protection fees, NSF fees, ATM use fees, and late payment fees for loan products. Be sure to read the fine print as banks usually try to collect fees from customers.
Balance Requirements
Banks may require certain balance requirements such as an average monthly balance, minimum balance, or minimum amount in savings in order to avoid fees or access benefits like higher interest rates
Interest Rates
Consider the interest rates available on both deposits and loans. Look for the highest possible rates, even if this means you have to make some compromises. Be aware that fees may offset any potential gains from higher interest rates.
Be sure to match your current situation with the right bank. For example, if you need a loan then prioritize banks that offer low loan rates, then once you no longer need a loan you can look at banks that better suit your other needs.
Looking For More Financial Advice?
This article outlines the various banking options available to consumers, such as credit unions, cash flow banking, and other traditional banking services. When choosing a bank, you should always ensure it has deposit insurance and be aware of potential fees.
If you’re looking for more information on how to choose a bank and other financial questions, visit our blog to read more.
