It doesn’t seem like picking a new bank is complicated at first glance. There are a number of factors to consider before making a switch. Today’s banks are more diverse than ever, and your choices are nearly endless. It is important to research and find one that meshes with your financial goals. You can make an informed decision if you review the fees associated with each investment option.
Some of the features that should be top of mind when shopping for a bank are explored in this post. It is important to remember that there is no one-size-fits-all approach when it comes to choosing the right bank, so take your time and do your research.
Different Types of Banks to Explore
Here’s an overview of the most common categories of banks on the market.
Retail banks
Traditional banks are financial institutions that cater to everyday banking consumers. They offer a wide range of services, from checking and savings accounts to loans and investments. Retail banks are typically brick and mortar banks with physical locations that offer a variety of services like checking accounts and savings accounts, direct deposit, credit cards, and loans. Bank of America and Chase Bank are among the top retail banks. Financial services offered by these banks include checking and savings accounts, loans and investments.
Most retail banks are national banks with unexciting interest rates. The branch locations are better suited for everyday transactions than for long-term savings. Customers need quick access to their funds and these locations are more convenient.
All retail banks in the US are insured by the Federal Deposit Insurance Corporation. Customers can rest assured that their money is safe because the FDIC provides up to $250,000 in insurance per deposit account. Up to $250,000 in insurance is provided by the FDIC. Even if the bank fails, your deposits are safe.
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Online banks
An online bank is a bank that only serves customers online. Money transfer, bill payment, and online banking are some of the services offered by online banks. Customers can’t get into physical branches. Customers need to use online and telephone banking for their financial transactions.
Using an online bank, you can handle most of your basic banking needs, including direct deposit, account transfers, and bill payment.
Since online banks do not have to pay for the high overhead costs that traditional banks do, they are usually able to pass down savings to consumers in the form of lower fees, lower interest rates for loans, and higher interest rates for savings accounts.
If you need to deposit cash, online banks can be difficult to use. It is a good idea to deposit cash at a physical bank branch. You can generally access your account and funds 24 hours a day, 7 days a week. It’s convenient for those who can’t make it to a traditional bank during business hours. It is very easy to open a new account. It is possible to open a new account 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 888-739-5110 Signing up online and transferring money from another account is all you have to do.
Some of the top online banks for 2021 include Ally, CIT Bank, Chime, and Discover Bank.
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Credit unions
A credit union protects its members and doesn’t score big profits. Credit unions offer competitive rates on a variety of services. The National Credit Union Administration protects deposits up to $250,000. An additional layer of security is provided by the NCUA for those who invest in a credit union.
Credit unions are similar to retail banks in that you can use them to store and access capital. As a result, credit union profits are reinvested into the organization, and are used to provide better services and products for members. Members of a credit union own the institution. The profits are reinvested back into the credit union.
There is a big difference between being a customer and a member-owner. It is possible to have long-term benefits for everyone involved if you become a member-owner. Lower interest loans and higher interest savings plans can be offered by credit unions since they don’t seek to profit from unnecessary fees. Credit unions tend to give more personal attention to their members, creating a better experience.
A few of the most popular credit unions include Alliant, Connexus, and Consumers Credit Union.
Can anyone join a credit union?
Credit unions are usually not open to the public. It can be more difficult to join one than it would be to join a traditional bank. It is important to research the membership requirements before joining a credit union.
You may be able to qualify if you work for an affiliated employer, school or church. You may be able to get discounted rates through these organizations. People who live, work or go to school in certain areas are served by some credit unions. Compared to traditional banks, these memberships have fewer restrictions and lower fees.
A membership fee of between $5 and $25 is charged by most credit unions. There are more benefits and discounts available when you join a credit union. Fees may be applied when opening an account. Before opening an account, it is advisable to read the terms and conditions carefully.
Investment banks
Consumers use retail banks, online banks, and credit unions to make deposits. Banking and investment services are offered by some larger financial institutions. There are additional benefits to bundled services.
Premium bank account options for high net worth individuals are offered by large investment banks. These accounts give their clients access to additional services and have higher interest rates.
Picking the Bank That’s Right for You
Depending on your financial situation and cash flow, the type of bank account you choose is largely dependent. When selecting a bank account, it’s important to evaluate your needs. If your company or school offers a credit union, you may want to take advantage of the higher interest rate. If you use a credit union, you can benefit from higher returns on your savings, as well as having access to other financial services that may not be available with a traditional bank. If you travel frequently, you might want to use a bank that has locations throughout the U.S. For added convenience, you may want to look for a bank that has an online banking system so you can access your account from anywhere.
As you narrow down your choices, there are some things to look out for. It’s important to research each option thoroughly before making a decision, so that you can make thebest choice for your needs.
Find the best interest rates
One of the top reasons why people put their money into banks is so that they can collect interest. Customers’ deposited funds are protected in the event that the bank fails, because banks are insured by the Federal Deposit Insurance Corporation. You should always look for the best interest rates at the bank. It is possible to find the best option for your financial goals by comparing different banks.
There are two ways to assess the rates you can get:
Annual percentage return (APR)
A simple interest rate is reflected in the annual percentage return. The rate of return is used to compare investments.
Annual percentage yield (APY)
APY describes a rate along with compounding, or the accumulation of interest on interest.
The interest rates can be different. It’s important to compare interest rates before taking out a loan. Many of the large national banks offer accounts with low interest rates. These accounts can be a great way to keep your money safe. It requires a much higher minimum balance to achieve higher APYs with these banks. Smaller banks and credit unions may have better rates for smaller balances.
At the time of this writing, many of the top online banks have rates of up to 0.65%. Traditional brick and mortar banks typically have an average rate of between 0.01% and 0.30%.
The stock market has an average annual return of 10%, but the highest rates are quite a bit lower. It is a lot lower than a credit card company will charge for maintaining a balance. If you’re looking to make a big purchase and need some extra financial help, taking out a loan from a bank is a great option. Both of those are better uses for your money.
In the event of a lost job or an unforeseen medical expense, you will want to have an emergency fund that you can easily access. It is important to research and compare different types of bank accounts so that you can choose the best option for your financial needs.
It is advisable to shop around for a bank that offers the highest interest rate possible. If you plan to store your savings or emergency fund there, you can automatically earn interest without taking any risks.
Watch out for bank fees
It’s a must to avoid bank fees.
Fees for basic services, such as having a checking or savings account, are common at big national banks. Smaller, local banks often don’t charge any fees, making them an attractive alternative for people who want to avoid paying unnecessary charges. You can easily throw away a few hundred dollars a year in bank fees if you aren’t careful.
A few hundred dollars each year can add up to thousands of lost dollars over the course of 10 years. You are forgoing potential investment returns that could have contributed to a larger sum if you didn’t save that money. That’s not to mention the compounding returns this money could have collected had you invested it in the stock market.
With that in mind, here are some of the top bank fees to look out for:
Account maintenance
Depending on the account you are using and the number of features you are benefiting from, monthly maintenance fees can range from $5 to $25 per month. Before making a decision, it is important to research the various fees that come with each account.
I don’t understand why banks charge customers monthly account fees. Fees are very easy to avoid if you go with a bank that doesn’t charge monthly fees.
ATM fees
While you are on-the-go, some banks tack on hefty ATM fees on out-of-network ATMs, making it harder to access your money. You can avoid costly fees if you check your bank’s policies before using an out-of-network ATM. It’s common with local or regional banks. More personalized customer service and better interest rates are offered by these banks.
Pick a bank that has universal ATM access or widespread domestic or global coverage if you want to avoid hefty ATM fees.
Insufficient funds fees
If you try to write a check that exceeds the balance of your account, the bank may hit you with an insufficient funds fee. It’s important to keep track of your account balance so that you don’t have to pay any fees.
An insufficient funds fee is different from an overdraft fee because insufficient funds don’t get paid. An insufficient funds fee is charged when there isn’t enough money in the account to cover the transaction.
Overdraft fees
If you send your account balance into the negative, many banks will charge you large overdraft fees. It is difficult for those on a tight budget to manage these fees. If you tend to overdraw your account, go with a bank that offers overdraft protection. If you accidentally overspend, your account won’t be hit with hefty fees.
Good customer service is a must
If you have ever lost a debit card while out on the town or noticed a fraudulent charge on your account, you know the importance of customer service. Customer service can make a huge difference in how quickly you can get back on track with your finances. Some banks are bad at customer service. It’s important to make sure you choose the right bank for your needs, as it will help to have a positive experience.
Customer service availability and reviews are important when browsing for a bank. It’s always a good idea to compare different banks and their offerings before making a decision. Before signing up, it is helpful to determine the level of customer care you need. It’s important to decide between an online-only bank or a national bank. Each type of bank has different benefits, so factor in convenience and customer service when making your decision.
It is worth considering if you really need access to a physical branch. It’s important to consider the convenience of a physical branch with the added cost that comes with it. It makes sense for people to take advantage of the lower fees that online banks offer. As a result, more and more people are making the switch to online banking for an easier, more cost-effective way to manage their money.
Look for a seamless mobile experience
Billions of dollars are being invested to create user-friendly mobile experiences. The investment is intended to improve customer satisfaction and provide a more convenient banking experience. Not all banks have followed this trend. Some banks are not able to keep up with technology needed for this type of banking.
There is no excuse to support a bank that does not have a good mobile app. You should be able to access your bank account no matter where you are.
Most national banks and online banks have robust mobile apps that let you handle almost any type of banking transaction.
Don’t skimp on security
Banking customers should be worried about cyber crime in 2021. Customers should protect their personal information by using strong passwords and avoiding suspicious emails. In fact, a recent study by Verizon indicates that roughly 90% of data breaches are done for financial gain, and banks are a top target.
The company doesn’t have a long list of security complaints, so look for a bank with a demonstrated record of protecting customer accounts. The bank you choose should have a good reputation for customer service and security. Ensuring that your online and mobile banking platforms come with two-factor authentication is a good idea. It is possible to protect your accounts from malicious actors with two-factor authentication.
Frequently Asked Questions
How many banks should you use?
There is no law that restricts the number of banks you can use. Most people have one or two bank accounts. It’s important to consider how many bank accounts you really need because having too many can be difficult to manage. Even though you are happy with your main checking account provider, it doesn’t offer a money market or high-yield savings account. If this is the case, you may want to consider opening a separate account with another institution that has higher interest rates.
It might be a good idea to open a second bank account. It is possible to make sure that your savings are not spent on impulse purchases.
Some people do find it advantageous to open more than one savings account to diversify their investments and track their savings in separate buckets.
Remember to watch out for maintenance fees, inactivity fees, and carrying too little of a balance. Before signing up for a new credit card, it’s important to check the terms and conditions. The last thing you want is to overdraft an old bank account that you forgot about, which can ding your credit score if you don’t resolve the matter within a certain time frame.
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Do banks offer cryptocurrency?
Most banks don’t offer cryptocurrencies at the moment. As more and more people use digital currencies, this could change. But this might change down the line after Bitcoin becomes more mainstream.
Most cryptocurrency investors manage their coins through dedicated platforms like Coinbase or Kraken. However, some brokerages (e.g., Robinhood and Schwab) offer cryptocurrency financial products, too.
Is it a good idea to keep some cash at home?
It is a good idea to have some cash on hand, but not more than a few hundred dollars. When travelling or in unfamiliar environments, you should always exercise caution when carrying cash. In emergency situations, this can be helpful if you just wish you had some cash but don’t want to go to an ATM. Cash-back options can be lifesavers.
There is no limit to how much you can keep at home. It is important to remember that having large amounts of cash at home can put you at risk of theft or other criminal activities. Interest in your closet can’t be collected from your money. If you buy anything over $10,000 in cash, you have to report it to the IRS. If you need to provide proof of the transaction, you should keep all receipts and other records for at least five years.
Is online banking safe?
If your online account doesn’t get hacked, online banks are as safe to use as traditional banks. It is important to have strong passwords for your online accounts in order to keep your finances secure.
Make sure to use a strong password and change it frequently. Passwords should not be used for multiple accounts to reduce the risk of a security breach. If possible, enable multi-factor authentication on your accounts and avoid using public wi-fi when online banking.
What is free checking?
Free checking refers to a checking account that does not have a monthly maintenance fee. A free checking account probably won’t have a minimum balance requirement. At no extra cost, it may offer online banking and bill pay.
Free checking accounts seem enticing at first because they don’t typically charge or penalize you, but they also tend to offer bare-bones service and low interest rates on deposits. If you want to maximize interest on your money, keep most of it in higher-earning accounts.
The Bottom Line
It all depends on which bank you use for your personal finance needs. It is important to compare the different banks to find out which is the best for you.
If you pick a bank that charges no or low fees, has a solid mobile app, and offers well-rated customer service, you can’t go wrong. Before you sign up with a specific bank, make sure to read reviews online.
Whether you’re comfortable using an online-only bank, or you prefer a traditional bank, check out my top picks.
You can find the right bank for you. You should make the best financial decisions for your situation.
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