8 Things to Consider When Choosing Your Bank
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Choosing the right bank is one piece of ensuring financial security, and allows access to comprehensive financial services, favorable lending terms, and attractive interest yields for savings accounts. For those unhappy with their bank and are on a quest for financial salvation, they likely know what they’re looking for. But for those who are new to the world of personal banking, the options at your disposal can seem difficult to navigate.
Fortunately, by doing adequate research and carefully vetting your options, you can determine your own financial preferences and select the option that best suits your needs. However, before you open up your account, ensure you are considering the following items:
1. The Different Types of Financial Institutions
Whether you’re seeking financial perks like good interest rates and no fees, or prefer personalized service, there’s likely a bank that prioritizes these aspects with their banking services. Here are some of the common types of financial institutions and their primary differences:
National Banks: National banks are large scale financial institutions that are available to its customers as brick-and-mortar establishments. Take, for example, Bank of America. In addition to offering a range of online banking services, they offer in-person service from their branches and ATM locations across the country.
Online Banks: Online banks like SoFi boast several advantages such as zero monthly fees, high interest rates for HYSAs and CDs, and a streamlined digital banking experience that eliminates the need for in-person service. While they don’t have any physical branches or handle cash in any capacity, they still offer the same level of customer service and financial protection you would find in a traditional bank.
Neobanks: While technically not a bank, neobanks are a relatively new way of handling your finances. They are considered financial technology, or fintech, firms that utilize digital platforms for currency. Most often, those with specialized banking needs will opt for Neobanks and benefit from competitive financial product offerings.
Community Banks: While smaller than your average national banking institution, community banks are great for those who prefer personalized attention to their finances. They’re often focused on certain geographical locations and offer relation-based banking such as mortgages and loans for small businesses, hence building the surrounding community. The downside is that they often lack advanced digital banking technologies, and often require in-person transactions.
Credit Unions: Credit Unions are the not-for-profit businesses that offer banking solutions. Compared to traditional banks, they can offer more favorable rates and lower fees in addition to various service offerings. Each Credit Union is different, some are more elite to join, whereas others just request a donation to a connected charity.
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2. Banking Fees
There are several fees to watch out for when weighing your banking options. This is especially true if you are seeking a new checking account, as they are often subject to charges. These fees vary widely, so you should be asking your potential banker about which ones you can expect when banking with them. Some common banking fees include:
- Overdraft fees
- Maintenance fees
- Balance dropping below monthly minimums
- Wire transfer fees
- ATM fees
- Cashier’s check fees
- Returned check fees
- Many More
3. The Reputation of the Bank
When searching for a bank, it’s best to pay attention to glaring red flags, especially in relation to its reputation. Bad customer service, undesirable track records, poor ratings and lack of profitability are all things that impact a bank’s reputation. Alternatively, factors like longevity, high profitability and excellent customer service ratings can help you determine its ability to meet your financial needs.
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4. Lifestyle Habits
Finances play a considerable role in just about everyone’s lifestyle. So, factoring that into your decision when choosing a bank is paramount if you want to remain with them long-term. For individuals who own small businesses, community banks work great because they are focused on supporting their community’s development. Or, if you primarily handle cash for your finances, a credit union may suit you better than online banking would.
5. Does the Bank Have Online Banking or a Mobile App?
Online banking is a commonly enjoyed convenience for many, as it allows you to access and review your funds from anywhere at any point you have an internet connection. Online banks and most big banking institutions provide online banking and mobile apps. Many smaller banks and credit unions don’t have the resources to provide as robust of an online banking experience, and some may not provide any digital banking.
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6. Security
A majority of banks are insured for financial losses by the FDIC. However, security breaches are an unpleasant reality in the financial realm, and they pose serious risks to consumer assets as well as their data. Be sure to read up on any recent security incidents involving a bank you’ve been considering – you may want to think twice about depositing your life savings there.
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7. The Bank’s Interest Rates
Interest rates on traditional savings accounts, high-yield savings accounts (HYSAs) and Certificate of Deposit (CDs) give you the opportunity to capitalize on your savings and build financial growth and stability. The higher the interest rate, the better, and banking institutions like SoFi offer some of the most competitive interest rates for savings out there.
You should note that interest rates at traditional banks are dependent on the national average, which has been hovering around .40% APY. Online banks often offer higher interest rates than traditional banks.
8. Competitive Financial Perks
Look for a bank with competitive financial perks! Banking with SoFi will grant you access to some really competitive financial incentives. As an online banking platform, SoFi provides unparalleled benefits to its members, including zero account fees, 4.5% APY on savings from direct deposit, early paychecks, rewards points that can be redeemed for cash, loan options, fractional stock shares and more.
Sofi’s services match that of your traditional brick and mortar bank, including the ability to take out mortgages and personal loans, in addition to their comprehensive investment opportunities. Boasting over 6 million members and high customer satisfaction rates, SoFi is a great option for online banking.
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