All about bank accounts
- October 29, 2009
- 0 comments
- Posted in Banks & Banking, Latest Posts
Banks drive me crazy. There’s practically no competition any more. A few big banks own the lion’s share of the business. They’re generally terrific for doing business online, with good bill paying, budgeting, and other services. But the investment products they sell are too highly priced (you can do much better somewhere else). And they’re killing us with fees.
If you have the option, take your account to a small community bank. Fees are lower, interest rates on savings often higher, and you’ll get more personal treatment. Small businesses, in particular, may get a more sympathetic ear. One drawback: ATMs. If the bank doesn’t participate in a network that’s convenient to your home or workplace, you’ll pay fees for withdrawals. The community bank will usually waive its own fee, but you’ll be charged by the bank whose ATM you use.
Credit unions also offer better rates, if you’re eligible to join one. Many of them offer up-to-date online services, such as paying bills and tracking your spending. They also give you a lot of personal attention, which has faded away in other financial institutions.
For pure savings accounts, choose one of the Internet banks, such as ING Direct, HSBCDirect, and EverBank. They typically offer higher rates on liquid savings and CDs than you can get at traditional banks, with no minimum deposit and no fees. You can link your online savings account to a checking account at your regular banking institution, for moving money back and forth. Some online banks offer checking accounts, too. They’re all insured by the FDIC.
How do you find the best bank account for you? Use these rules of thumb:
— Checking accounts. What is the lowest average balance you will leave on deposit every month? If it’s small, or if you typically write down the account almost to zero, get a checking account that pays no interest. It should also charge no monthly maintenance fee. If you handle it carefully, this account will never cost you a penny.
If you can maintain a balance of $2,500 to $5,000, depending on the bank, go for an interest-paying account. There are usually no monthly fees and you’ll earn a smidgeon of interest on your deposits.
If you fall below the minimum balance, however, you might be charged $10 or $15. If this happens more than once, switch to an account that requires no minimum. You’ll earn no interest, but will come out ahead, after fees.
You might consider no-interest checking even if you can afford to maintain a minimum balance. Instead of keeping the bulk of your money in the checking account, keep it in the bank’s money market deposit account. That account pays more interest than you’d earn in a checking account. When you need more money to pay the bills, use your online account to transfer cash out of the money market account and into your checking account. You can also arrange that, if one of your automatic bill payments overdraws your checking account, the funds will be taken from your money market account, at no cost.
–Savings Accounts. Go for the highest interest rates on accounts of your size. That usually means federally insured Internet banks.
–Fees. The bank is required to give you a schedule of the fees it applies to each type of account: monthly fees, fees for every check you write, fees for dropping below the minimum balance or bouncing a check, fees for checking your current balance, fees for using another bank’s ATM, and on and on.
Don’t let your banker’s hand be quicker than your eye. A checking account might deliberately carry a low monthly fee or no fee at all in order to make it look cheap. But the bank might recoup by charging you extra for processing checks. You want an account that pays the highest interest rate possible on the average balance you can afford to keep, while not breaking your back with extra fees.
Tags: bank accounts, bank services, banks
