There are so many banking options out there that you could spend the rest of your life reading and comparing the fine print. It’s no wonder choosing a bank can easily become overwhelming.
How to choose a bank
Look for these five important elements:
- No-cost setup and and account maintenance
- Low (or no) fees, and no fee surprises
- Legitimacy and trust
- Good customer service
1. No-cost setup and account maintenance
If you’re in the process of choosing a bank, a low or fee-free checking account should be a given; there’s no need to be charged for the pleasure of setting up an account. While according to Bankrate’s 2015 Checking Account Survey, 37% of checking accounts are honest-to-goodness free, a whopping 95% of checking accounts are free if you meet certain requirements, such as setting up regular direct deposits and keeping a minimum monthly balance.
Even if you were going to set up direct deposits anyway, or keep enough of an account buffer that you’re not worried about dipping below a minimum monthly balance, it’s less stressful to have a low or fee-free checking account, rather than a checking account with strings attached. Make sure a checking account is a part of that honorable 37% of low or fee-free checking accounts by looking for and avoiding ‘free’ checking accounts with terms such as ‘options to avoid the monthly service fee.’
2. Low (or no) fees, and no fee surprises
Fees, fees, fees. You can be charged by banks unexpectedly for overdraft fees, account maintenance fees, account closing fees, and more. Look for banks with low or fee-free checking accounts that have accessible and fee-free ATMs and zero overdraft fees. While it may be hard to believe, banks can still make money without charging their customers ridiculous fees.
If you travel internationally, you’ll want to check banks’ international ATM fees as well. It’s important to note that no matter what bank you have, out-of-network ATMs may cost you money because the ATM operator could charge you a fee to use their machine. However, most big banks charge you for using out-of-network ATMs on top of the ATM operator fee. For this reason, it’s best to look for a bank that doesn’t charge you out-of-network ATM fees if you travel often.
Also, bear in mind that credit card networks charge international service fees on all international transactions to cover the costs of converting currency, and using foreign ATM and card networks.
Avoiding a bank that dishes out fees can help you save a lot of money. JPMorgan Chase, Bank of America, and Wells Fargo—America’s three largest banks—made over six billion dollars from overdraft fees and ATM fees in 2015, or about $25 per every adult in the United States. Average ATM fees have been climbing consistently every year for the past decade, and many believe they will continue to rise as banks are pressured to bring in more revenue.
3. Legitimacy and trust
You want to make sure you can trust your bank. Make sure your bank is FDIC insured, which means that your deposits are insured up to $250,000 through the issuing bank. Every bank insured under the FDIC can be found on the FDIC website under their unique FDIC certificate number.
To make sure a bank would be convenient for you, find out about in-network ATM locations near you as well as any banking features you would use regularly, such as direct deposit. You’ll also want to make sure your bank account is user-friendly. For instance, you might want a bank with a decent mobile app so that you can access your account from almost anywhere with ease.
Simple’s unique features make banking much more convenient. With Simple, you can create savings Goals, which take money from your overall balance and hide it in digital envelopes. Your overall balance doesn’t change, but Simple adds a neat feature called Safe-to-Spend, which shows you how much expendable cash you have left over, once your Goals are taken care of.
Ready to see how you’ve done with your saving and spending? Check out Simple’s interactive Reports, complete with breakdowns of the types of spending you’re doing. You can even add hashtags to your transactions to easily find how much you spent on #vacation, or for #holidaypresents this year, from the desktop site or mobile app.
5. Good customer service
While many people looking for a bank focus solely on numbers, such as the interest rate of their accounts and banking fees, it’s important not to forget that time is money. Whether you have a quick question or you think you might be a victim of fraud, you’ll be glad you have a bank with excellent customer service.
One of the big reasons Simple was created to challenge the idea that banks can be frustrating. They make a point to get you on the phone with a human fast, and that human will explain to you in everyday terms what’s going on with your bank account. Simple is a banking service run by humans, for other humans—and it shows. We even give out gifts–like a stylish, handcrafted wallet–when you refer your friends to us.
But what about high-interest checking accounts?
While high-interest checking accounts can be nice, they aren’t worth having if they are with a bank that could slap you with an unexpected fee or make you wait on the phone while you’re stressing about why and how you were hit with a fee. Only 5.5% of banks offer free interest-bearing checking accounts with no strings attached. Furthermore, the average yield for checking accounts that gain interest has been on a pretty steady decline since 2000.
If you want your money working for you while you sleep, a high-interest checking account is not going to get you much bang for your buck. In 2016, the average yield of interest-bearing checking accounts was 0.06%. If you have a decent amount of money in your bank account and want to get the most out of it, you’re better off investing your money somewhere, like in the stock market, which gives an average yield of 7% over the long run. For more info on this, talk to an investment professional.
The reason some amount of interest in your checking account is nice is that it helps keep your money from eroding in value because of inflation. It’s best not to stress too much about the interest rate of your checking account and to focus more on the heavy hitting bank factors that affect you and your wallet the most.
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