Choosing a BETTER Bank for YOU!!!
Choose a better bank for you A step-by-step guide to cheaper & easier banking
Alex Thomas Sadler / clarkhoward.com
Choosing the right bank can be tricky, especially if you aren’t quite sure what to look for and haven’t had to make any big purchases that involve big loans — like a mortgage or a car loan.
With so many options out there these days, it can be easy to just stick with the big mega bank you’ve been using for years. In fact, most Americans have a checking account with one of the four largest banks: Bank of America, JPMorgan Chase, Citi and Wells Fargo. According to Consumer Reports, these “big banks” hold about 40% of all U.S. commercial bank assets. They’re also convenient, with more than 17,000 branches and more than 80,000 ATMs – and most of them offer easy-to-use digital tools and resources.
But with all the various banking options available to you these days, there are several factors to take into account when deciding which bank — or credit union — is best for you.
Survey says: Bigger is NOT better
According to Consumer Reports data, all four “mega banks” scored in the bottom fifth of a recent survey, which rated more than 74,000 banks and credit unions.
Customers of the big banks weren’t necessarily unsatisfied, they just discovered that once they shopped around, they were able to find better banking alternatives at smaller banks — including some that only operate online. The survey also found that consumers were more satisfied with credit unions, particularly concerning customer service and fees.
How to choose a better bank for you
The good news is that if you aren’t 100% satisfied with your bank, choosing the best bank that fits your needs is now a lot easier than ever. And even if you do feel satisfied with your bank, it’s crucial that you shop around to make sure you’re getting the best bang for your buck.
If all of your finances are in one place — so let’s say your checking account, savings account, car loan and home loan are all with one bank — then you may get some added benefits or fee discounts for that. But according to Consumer Reports, “when you buy a ‘product bundle’ at a bank which contains a number of services rolled into one offering, it’s hard to know if the fees you pay are lower than if you opted to get different services at different banks.”
There are so many low-cost and convenient options available these days, you don’t have to settle for one bank or one offer.
In fact, you can get specific services from as many banks as you want — which can often be the best way to get the best deal on each product or service. There’s no rule against having separate accounts at a bank, credit union and online bank — or a combination of two.
How to shop for the best deal on each of your financial needs
If you shop around for the best deal at different financial institutions, there’s a good chance you’ll save some money. According to Consumer Reports, 38% of people said they have a second bank or credit union they do business with, because they “were able to get better rates for some services and products at other institutions than their primary bank or credit union.”
Most people stick with the same old bank because they just don’t want to deal with the hassle of moving everything — but it can be a lot easier than you think.
Plus, online banks are now offering much higher rates on savings accounts — significantly higher than the current rates at traditional, bigger banks. So with that in mind, why not just move your savings to take advantage of the bigger return?
To give you some context, online bank Ally increased the rates on its savings accounts to 1.60% — while the rate on a regular savings account at Bank of America currently sits at only 0.03%.
Bottom line: You aren’t tied to one bank no matter how long you’ve been doing business there. With so many options available, you will very likely find better deals if you start looking around. Do some research and find the best bang for your buck on each service you need — or may need in the future (like a mortgage or car loan).
What to look for to get the best service, lowest costs
Here are a few tips to help you get the best deals on all of your banking needs.
Checking & savings accounts
There are a few key factors to consider when choosing where to open a checking or savings account.
Here are just a few examples:
Your best bet is going to be a credit union or online bank — especially considering America’s three largest banks (Chase, BoA & Wells Fargo) raked in nearly $6.5 billion last year in overdraft and ATM fees.
A new study from Bankrate.com says 82% of the largest credit unions offer free checking. When it comes to overdraft fees, credit unions also will cost you less compared to banks ($28.20 vs. $33.38 respectively), according to Bankingrate.com.
Certificates of deposit (CDs)
Credit cards and mortgages
Here’s how they work: You deposit money into an account that can be used as if it were a credit card (but without consumer protections) or like an ATM card to withdraw money (but without the protections of an ATM card).
Prepaid cards may boast a Visa or MasterCard logo — but they’re really just inferior versions of the real deal.
Some people like the idea of not being able to spend more money than you have, but the problem with that way of thinking is that prepaid cards typically fee you to death — which is just a big waste of your hard-earned cash.
Switching banks can get tricky depending on how many accounts, cards, automatic payments and other things you may have set up through your current accounts. Here are a few steps to take to make the process as easy as possible.
1. Open a new checking account
If you’re switching your primary banking services to a new bank, credit union or online bank, first open a checking account to start the process of moving things over. Most banks will allow you to do this online, and if not, then it’s a pretty quick process in person at your local branch. Opening the new account may require an initial deposit of $50 or less, but just make sure there’s no annual fee on the checking account.
2. Switch your paycheck direct deposit
This process may take your bank some time, so it’s better to do it as soon as you open the new account
3. Stop automatic bill payments
If you use automatic bill pay for any of your monthly bills, make sure to stop those immediately. Just make a note of when each bill is due each month, if you’re worried about forgetting to pay without the automatic bill pay doing it for you. There are two ways to do this:
Also, when it comes to monthly payments and bill pay, Clark suggests not turning off the paper statement option. If you have the bills sent to you in the mail each month, you will always have records of everything in case a mistake is ever made.
4. Temporarily keep the old account open
Don’t close your old checking account until all payments and bills have been made — and have cleared your account.
5. Close the old account
Once all balances have been paid off, you can transfer the money from your old checking account to your new one or get a check from the bank to deposit into your new account.
6. DO NOT close credit card accounts
If you open a new credit card and don’t use your old one anymore, do not close the account — that will damage your credit. Just let the account sit there after the balance is paid off.
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