When it comes to choosing a financial institution, consumers have a plethora of options.
The train of thought has long been the choice should largely be based on factors such as ATM fee costs and/or balance minimums. However, there are many other issues that people should take into account.
Instead of just looking at fee structures to determine where you should open an account or accounts, you should dig deeper to compare which best suits your individual needs. Choosing one just because they have low fees may be a disservice to you.
Technology, regulations, laws, and competition are allowing institutions to offer a wide array of products that can suit the needs of just about anyone.
Traditional banks have created online banking services for their customers to carry out nearly every transaction they would inside a brick-and-mortar location. You can open an account, set up direct deposit, and pay bills all from the comfort of your home.
If your banking needs are more complex, entailing mortgages or the desire to grow your balances, you will likely need to pay a fee. Furthermore, financial institutions that have branches will likely serve your needs better than the online banking outfits.
Plain Vanilla Options
Depending on where you are in life, your banking needs may range from being minimal to complex. You may be just starting off, out of college perhaps, so a plain vanilla checking account will do.
In this case, traditional banks offer accounts that could make for solid choices. The larger banks typically have ATMs literally on every corner, which is valuable for those who are on-the-go with little time or patience to hunt down this convenient option.
Also, be on the lookout for institutions that allow for no fee withdrawals. Be cognizant there are still institutions that will charge you for using ATMs outside of their approved networks. To avoid this, you may want to consider institutions that have branches nearest to you.
Another plus offered by many institutions to those with simple banking needs relates to maintenance fees. Often, these institutions will waive such fees for those who have direct deposit. Those who maintain certain minimum balances may also qualify for no-fee checking accounts.
Steering Clear of Branches
If the mere thought of going into a bank makes you miserable, you're in luck. In addition to online banking services offered by traditional banks, there are financial institutions that operate strictly via the Internet – they have no physical location.
There has been a surge in online banking institutions, and their convenience is one of the reasons they are gaining in popularity. They are perhaps the simplest and cheapest of the bunch. They are able to offer no-fee accounts because they do not have the overhead costs of operating physical branch locations.
In most cases, the only fees their customers incur come from making ATM withdrawals.
There are no overdraft fees because purchases that are attempted to be made that exceed the account's balance are simply declined.
These online banking outfits can also benefit the so-called underbanked. When selecting a financial institution you must consider your creditworthiness. Although banks' credit requirements for opening accounts aren't as lenient as their requirements for approving loans or credit cards, there are some in place.
Review your credit report to find out your score. Also, be aware that if you've had banking accounts closed due to overdrafts, or other negatives, you likely won't be able to open an account at a traditional bank. In these cases, some online banks can help.
Credit is not as much of an issue because the bank is not granting any loans or extending you credit. Any purchases or payments you try to make that exceed your balance will be declined. Neither the bank nor you are on the hook for any debts. You're strictly limited to the amount of money you have in your account.
Plain Vanilla With Sprinkles
Perhaps you want a little more than the basics of plain vanilla checking accounts. This includes watching your paycheck, and other deposits, grow.
In these cases, you want to choose a financial institution that pays interest on outstanding balances, for example. Start with credit unions. They operate as not-for-profits and as member-owned outfits. As a result of this, they tend to have higher APYs on deposit accounts and lower fees than traditional banks.
In addition to interest, many financial institutions offer cash back rewards. These amounts can be substantial if you use the account to make many purchases or pay many bills. This makes them ideal for those who want to increase the amounts in their financial coffers.
If you own a home or even your own business you should consider institutions that can handle all your banking needs. For example, if you have a mortgage, many institutions will bundle the mortgage with checking and/or savings accounts products. Of course, such offerings will likely entail fees, but the convenience of housing all your banking products under one roof can mitigate such costs.
In choosing such bundles, the same rules apply when it comes to doing your homework. First and foremost, compare the interest rates on the loans.
Financial institutions may offer low interest credit cards, too, in order to sweeten the deal. Be careful with these offers. Often, these low or even zero interest rate card offers are for only an "introductory" period, which is typically six months. After that, the rate could zoom higher.
On that same note, if you're considering changing banks and you have one of their cards with a high interest rate, balance transfers are ideal. If switching, find out if the financial institution you are considering allows for such transfers.
Summing It Up
The good old days of choosing a financial institution based on which offers the lowest maintenance fees are gone. In fact, you could be hard-pressed to find banks that don't make it easier for you to get out of paying the fees altogether.
Instead, the financial institution decision should be based on your individual banking needs. Technology, laws, regulations, and competition have given consumers more options and power to be more in control of their financial decisions. Institutions have recognized this, and they've stepped up with a wide array of products and services to meet consumers' needs.
The onus is on you to be as proactive as possible in making your choice.