Choosing Your BankPersonal Finance
You have several options when it comes to banks and the type of bank you choose to deal with. This selection depends on your priorities and preferences. Banks come in 3 main flavors. You have your local retail chain bank, typically with several brick and mortar locations in your local area. Another option is your local credit unions, which are controlled by the members and provide low cost banking. Your last option is banks which operate purely online, reducing costs and eliminating fees by handling all transactions digitally.
Compare Banking Sectors
Consider and compare each one. The primary factors considered are services offered, fees, and accessibility. Retail banks are likely to have the highest costs, but also have the biggest network of branches, tellers, and automated teller machines. Credit unions have lower costs, but less branch locations or free access ATMs. They usually offer the same amount of services, but may not. Online banks have no branches at all, but charge lower costs since they do not have branch related expenses such as tellers. The downside is that they offer less services and all transactions must be executed digitally. You never see a person.
Compare Interest Rates
Consider the interest rates offered by the banks. These rates compound annually and determine your long term account gains. Many banks offer a rate which starts high at the beginning and decreases to a lower long term rate. “Teaser rates” should be ignored; they expire too quickly to actually matter. Only concern yourself with the actual long term rates.
Compare Fees and Expenses
Many costs are stated in advance. You should take the time to carefully review all of the financial conditions of the account. There are subtle costs that do not appear until you violate account restrictions. Many fees can be waived under specific conditions. If you cannot waive costs, simply look at other banking institutions. Fees devour your already low return from interest rates or annual yields, especially if regularly charged. The most obvious examples of bank fees are ATM, Overdraft, and Monthly “Maintenance” fees. The ATM transaction fee is a cost that is directly correlated to how often you need to carry cash in pocket. There are banks that offer low or no ATM fees, but these rates are usually only from ATMs that are offered by the branch. If you pick a bank with a large amount of automated machines in your local area you can avoid a substantial amount of these fees. Overdraft fees only occur if you charge or withdraw more money than you have in your account. You must pay the overdraft fee in addition to restoring a positive balance. The more you incur overdrafts, the higher your overdraft fees may become. The minimum balance is the amount of money required to open the account. This condition does not seem like a cost, until you need to make a withdrawal below the minimum account limit. You may be charged a fee if you do not restore the minimum balance within a certain time frame. If you wish to withdraw a specific amount of money the minimum fee cannot be included or factored into the amount of money. The monthly maintenance fee is a monthly charge that is levied by banks for servicing. This fee is avoidable by simply choosing a bank that doesn’t have a fee, or meeting bank requirements for waiving the fee from your account. Waivers often occur by meeting a minimum balance, direct deposit, or a specific number of transactions.
Ensure FDIC Status
Your bank account needs to meet regulations and conditions by your state and federal government. Most American banks are formally insured by an institution called the FDIC, or Federal Deposit Insurance Corporation. This corporation insures the bank’s accounts up to $250,000. Principal lost up to this value due to bank irresponsibility will be replaced by insurance. Investment securities are not covered by the bank’s insurance. Be careful to confirm that your bank accounts are covered by the FDIC.
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