Thanks to the Internet and new technology, you are no longer limited to banking within your own city or state. You can have a bank account from anywhere in the US or even an online-only bank. With so many choices available, how do you choose? More importantly, how do you switch banks if your current one no longer meets your needs?
First, only consider banks which are FDIC-insured. This means the bank deposits are insured by the Federal Deposit Insurance Corporation for up to $250,000 (How to Choose a Bank Account, 2015). A bank that does not carry this insurance is not a safe choice, because you can lose all of your funds in a bank failure.
Find out what fees the banks charge and compare them to see which one has the fewest or lowest costs. Common fees charged by banks include the following:
- Fees for not maintaining a minimum balance
- Fees for ATM withdrawals
- Returned check fees
- Overdraft fees
- Fees for excessive number of checks written (usually in a savings account)
When comparing your bank options, find out the details of what fees are charged and what options you have to avoid those fees (How to Choose a Bank Account, 2015).
Most banks offer multiple products for their customers to meet a variety of needs. For the person who seldom carries a balance in the checking account, he or she may want to have a free checking account. Others may value an account which earns interest on the average balance. Compare the various checking and savings accounts options to determine if one is ideal for you.
When comparing products, make sure you know the balance requirements. Banks often have three types of requirements on their accounts.
- Average balance – some banks use an average balance to figure fees, which allows your balance to fall below the required amount for a short term without causing a fee
- Minimum balance – with this balance, you cannot let it fall below or you may incur a penalty or lose out on special features such as a better interest rate on interest-bearing checking accounts
- Minimum savings balance – some banks require you to maintain a minimum amount in your savings account to keep it from being closed
If you plan to open a savings account or even an interest-bearing checking account, then you will want to compare rates. These can vary by bank and may change as overall interest rates change. Shop around to find the best way to put your money to work for you. Naturally, you want to find the bank where you can accrue the most interest with as little fees as possible.
Most banks offer special features with their accounts. While they may provide similar products and look the same on the surface, the details are often different. Here are some common features included in having an account and what to look for.
- Online banking – the ability to access your account online is essential, but some banks have a separate app you can use as well for faster access
- Electronic statements – many banks send out e-statements instead of mailing paper statements, but some make this the default option while others require you to opt in
- Direct deposit – Most banks allow you to direct deposit paychecks, but it is important to find out how well this system works and if there are any issues. Online reviews can be helpful for this point.
- Automatic payments – most banks provide this feature, but how soon must these payments be set up and can you send to individuals as well as businesses? Is it electronic payments only or can physical checks be mailed automatically?
- Wire transfers and cashier’s checks – find out if these features are offered and the cost
- ATM fees – find out about fees for using out-of-network ATMS if you travel a lot, some banks refund the fees
Some banks now allow you to make deposits online as well or offer other unique features which were not available in the past. When looking at these features, ask yourself if you would utilize them and how much to determine what priority they have in your decision (Choosing a Bank).
How to Switch Banks
You may be moving to a new location or you may be unhappy with your current bank. For whatever reason, you want to switch to a new bank. This is a fairly straightforward process, but you must be careful to avoid any problems that may occur. It’s a good idea to open a new bank account before closing your old one (How to Choose a Bank Account, 2015).
First, balance your account and know what outstanding payments have not posted. Make sure to keep enough money in the account to cover these debits when they come in.
Next, switch all automatic payments and direct deposits to your new account. This helps you avoid the expense and hassle of having payments returned.
After your old account is no longer needed, ask for a cashier’s check on the balance and close out your account (Choosing a Bank).
Choosing a bank is one of the most important financial decisions that you will make. Take the time to look for one which meets your needs, and be willing to switch if you find it no longer offer what you are looking for.
Eric Lawrence Frazier, MBA
President and CEO