When you compare banks, consider convenience and cost.
Before you settle on a place to bank, it's smart to know what the alternatives are. There are probably more than you might think.
Traditional banks, sometimes known as bricks and mortar banks, operate out of physical locations, sometimes a main office and a number of branch offices. They range from huge global institutions to small community banks. Increasingly they also offer online banking services.
Credit unions are cooperative, not-for-profit financial institutions created by a company, labor union, nonprofit institution, or community group to provide banking services to members. Each credit union sets its own eligibility requirements, which you must meet to use the credit union.
Virtual banks operate entirely online, without physical branches. You handle all transactions electronically.
Brokerage firms, mutual fund companies, and other financial services companies may also offer banking services.
MAKING A CHOICE
Among the things that can help you choose a bank for the first time or decide that it's time to move your accounts from one bank to another are:
- How convenient the bank is
- The products and services it offers
- What the services you need will cost
- How you're treated
As important as your decision is, remember that you are not making a lifetime commitment. Although some people use the same bank for decades, 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 checking and savings accounts and take your money somewhere else. Making the switch is easy, and there's no charge.
CONVENIENCE
One of the major issues in choosing a bank is how easy it will be for you to use. A bank with branches that are close to your home or workplace generally meets the convenience test.
If you need to take money from the ATM, make a cash deposit, or buy a money order, you can do it without having to go out of your way.
Similarly, if you travel a great deal, you might equate convenience with being able to find a branch of your bank in cities around the country or even around the world.
As banking becomes increasingly electronic, from direct deposit of money you're owed into your accounts and electronic bill payment services for money you owe, convenience may be defined differently in the future — not how easy the bank is to get to or what hours it's open, but how much of your banking business you can handle easily from your computer or mobile phone.
COST
As you compare costs, you'll want to pay particular attention to the charges for the services you're most likely to use. You can visit different banks or do an online search for banking costs as a first step.
For example, if you visit the ATM frequently, you can find banks that don't charge a fee for using ATMs they own — usually those located in their branches but sometimes at airports or train stations. You may also find banks that don't charge you for using another institution's ATM if it's part of the same network.
Similarly, you can find banks that offer free checking or very low fees. Generally speaking, credit union charges are the lowest. If being able to handle your banking online is a priority, be sure to compare the cost of that service at various banks as well. One alternative may be to use a virtual bank for some services and a traditional bank for the others.
You're likely to find that banks tie access to low fees or free services to your keeping a minimum balance in your combined accounts with the bank at all times. If you have that amount — which may be as little as $25 at some credit unions and $1,500 or more at some big banks — keeping it on deposit can help reduce costs.
LOW-COST BANKING
Most banks offer at least one very low-cost checking account and one savings account for which no fees apply when the balance is low. Sometimes you must qualify for these accounts, by being 65 or older, a student, or the member of some other group. Other times they are open to everyone.
If these accounts meet your needs, they can save you a lot of money. But if you write more checks than you're allowed, have insufficient funds to cover a check you write, or otherwise violate the terms of the agreement, the extra fees the bank applies may make these accounts unexpectedly expensive. So be sure that an account like this really will work best for you before you choose it.
Using a virtual bank can also be very economical. Because they have low overhead they typically charge low or no fees and pay higher interest on savings than traditional banks. Virtual banks don't have ATMs, but some reimburse you for a certain number of withdrawals each month or provide access to a network of machines you can use at no cost.
Finally, credit union fees are usually lower and the interest they pay is higher than their for-profit competition, making them the most economical place to bank. A potential drawback is that many credit unions have few if any branches and are open only limited hours.
FINDING THE SERVICES YOU NEED
Most banks and credit unions offer the same basic services: checking, savings, and money market accounts, loans, certificates of deposit (CDs), bank or debit cards, and direct deposit.
For a small fee, you can buy bank checks, sometimes called cashier's checks, certified checks, and money orders at traditional banks if the recipient needs assurance of payment. Banks will also guarantee your signature, which is necessary on some documents. These services aren't available through virtual banks, though you can arrange electronic bill payment and automatic transfer of funds to other accounts.
An essential part of service, however, is customer service: the way you're treated by bank employees and the ease with which you can get problems resolved. It may be hard to evaluate the actual level of customer service when you're looking for a new bank. But it's something you should include in your assessment of any bank where you do have an account.
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