Choosing the right bank can be a difficult task. There is an expanding
menu of services and widely varying fees for them. Complicating the
issue is the high number of bank mergers, which can change a bank's
policies and fee structure overnight. To help guide consumers to the
bank that best fits their individual needs, the Better Business Bureau
has the following tips for consumers.
Before selecting a bank, be sure to have a good understanding of your
own banking habits, and what you need from your bank. If you know what
you will need from a bank, it will be much easier to evaluate and
compare between various offers. Here are some issues to take into
account when examining and comparing bank services and fees:
Location
Just because a bank is
around the corner from home or work does not necessarily mean that the
bank is the best one for you. You should consider whether or not you
are willing to pay higher fees for better location, or if lower fees
may be worth a little extra effort.
"Relationship Banking" vs. Shopping Around
Some banks encourage their customers to hold all of their bank
accounts, as well as credit cards, mortgages, etc., with the same bank.
The catch phrase for this is "relationship banking." An advantage of
relationship banking is that your bank may let you add together all
your account balances to reach the free checking minimum or offer other
special deals. However, if your bank does not offer incentives for
relationship banking, you may want to consider holding separate
accounts at more than one bank to get the best deal.
ATMs
Automatic Teller Machines (ATMs) are currently the most popular way of
gaining access to one’s accounts, but at many banks they are also
connected to a lot of fees. Using your own bank’s ATM is often free,
but your bank may charge you an average of $1.00 to $1.50 each time you
use another bank’s ATM. Then you may also have to pay an additional
$1.00 to $1.50 to the bank where you do not have an account for the use
of its ATM. You should know your own pattern of ATM usage, and compare
that to the fees being charged by the bank for the use of its own ATM
by its accountholders and for the use another bank’s ATM. If you
normally use an ATM multiple times a month, an account that charges
high ATM fees is probably not a good choice.
Minimum Balances & Maintenance
Many banks require
balances of $1500 or more in order to get free checking or savings
accounts. Consider the costs of the fees saved, and compare them to the
amount of interest you might earn on that same $1500 if placed in a
savings account or a CD. The monthly maintenance fees charged by banks
on checking and savings accounts are generally not charged to customers
who keep a certain balance, usually over $1500.
There are two ways that
banks can calculate the fees they charge to customers who fall beneath
this minimum balance. The more common way is to charge a fee if the
average daily balance over one month is lower than the minimum. This
means that if the minimum balance is $1500, and for a couple of days of
the month you have $1400 in the account, you will still not be charged
the fee. The less common method is to charge the monthly fee if the
balance in the account falls below the minimum for even one day. This
means that if the minimum balance is $1500, and for one day of the
month your balance was $1499, you will be charged the entire monthly
fee.
All banks in New York State that offer personal banking services must also offer "lifeline" Basic Banking Accounts. These low cost accounts must offer the following:
- An opening deposit of no more than $25.
- A minimum balance of no more than one cent.
- A monthly maintenance fee of no more than $3.
- Unlimited deposits at no charge.
- Eight withdrawals (checks, bank withdrawals, ATM) per month.
Check out the rules relating to these Basic Banking Accounts
at the banks you are considering. Each bank can impose its own rules
relating to direct deposit and other fees for bank services. Consumers
may have to close all other bank accounts in order to be eligible to
open Basic Banking Accounts.
Interest Bearing Checking Accounts
Think about the costs and benefits of interest bearing checking
accounts versus savings accounts or CDs. Consumers can usually earn
more interest in a savings account or CD, rather than an interest
bearing checking account. If you routinely keep enough money in your
checking account to meet the minimum balance and avoid paying fees,
then gaining interest on that money is an additional bonus. However, if
you are unable to meet the minimum balance requirements, an interest
bearing checking account may have higher monthly maintenance fees than
a checking account that does not earn interest.
Special Accounts
Many banks have special accounts, for children, students and senior
citizens, and special savings plans, such as "Christmas clubs" or
vacation plans. These special accounts normally do not carry any fees.
Fees for Special Services
Banks are starting to
charge for more services. Many banks now no longer return canceled
checks to a customer, but rather microfilm them, destroy the originals,
and charge customers a $3 or $5 fee in order to get a copy of a
particular check. Again, there is a lot of variation between banks, so
think carefully about how often you are likely to need such services.
Overdraft protection is a
service that more and more banks are offering. Be sure to carefully
review the terms of the agreement before you sign. Many banks are
actually offering short term loans as overdraft protection, which
requires a credit check and charge interest on the money loaned to you
by the bank to cover what would otherwise be a bounced check. This may
be combined with an add-on fee for the use of the overdraft protection.
This service may offer substantial savings over bounced check fees and
can be convenient.
Banks are now trying to
encourage both individuals and businesses to use direct deposit
services. Through direct deposit, your paycheck or government issued
check is deposited directly into your bank account. No paper check is
issued, and your entire check is available as cash on your regular
payday. Some banks are offering reduced or waived monthly maintenance
fees, free ATM usage and other incentives to sign up for direct deposit.
Another special service
that banks offer is selling checks. Many banks offer a certain amount
of free checks as an incentive to open an account, and then ask that
you purchase checks through them afterwards. Checks are often cheaper
when purchased directly from a check printer.
Charges Per Transaction
Along with the monthly maintenance fees that many banks charge, some
also charge fees per transaction, such as writing a check, moving money
from one account to the other, checking balances at your an ATM, or
withdrawing money through an ATM. These fees usually amount to $1.00 or
less per transaction (if you use your bank’s ATM), but if you perform
many transactions per month, the costs can be significant. Evaluate how
many checks you write in a month, or how often you need to check your
balance at an ATM machine, and be sure to take that into account when
choosing banks.
Online Banking
Many banks offer online
banking services through which all banking transactions can be done
from a personal computer with Internet access. Ask whether your bank
charges a monthly access fee for these services. You might also want to
inquire about a trial period during which you can use online banking
services free of charge. If you decide to use online banking services
to pay your bills, your bank may charge a monthly fee for this service
ranging from $4.50 to $6.00 on average, although some banks do offer
these services for free.
If you are interested in
using an unfamiliar online bank, check the Web site’s "About Us" page
to see whether the bank has physical offices in the United States. Be
sure that deposits with the online bank would be covered by insurance
through the Federal Deposit Insurance Corporation (FDIC); look for the
familiar FDIC logo or the words "Member FDIC" of "FDIC Insured" on the
site. If you choose to use a bank chartered overseas, the FDIC may not
insure your deposits.
Some traditional banks
may use a different name for the online presence of their bank, for
insurance purposes. If this is the case, be aware that your deposits at
the parent bank would be added to any separate deposits at the online
version of the same bank, and the total would be insured by the FDIC
only for the maximum allowed for a single bank.
Be sure that transactions
through online bank’s Web site will be secure. In the address window of
your browser, check to see that the first part of the online bank’s Web
address changes from "http://" to "https://;" and also check the lower corner of the Web page to see whether a lock or key symbol appears, signifying security.
When using online banking
services to pay your bills, remember to keep records of your
transactions. Check to see whether the online bank offers customer
support services, such as a toll-free number or email address, in case
you need help resolving any problems that may come up. For further
information on the track record of an online bank, contact the
resources listed at the end of this report, including your Better
Business Bureau.
Bank Mergers
Complicating the issue of choosing a bank is the high number of bank
mergers, which can change a bank’s policies and fee structure
overnight. More often than not, if your bank is involved in a merger,
the merged institution will keep the higher of the two banks’ fees. If
this occurs, take the opportunity to check out other banks to
comparison shop.
Conclusion and Resources
The
most important thing to realize is that you, as a consumer, has the
right to change banks at any time, for any reason. If your fees
increase or your branch closes, you have the right to make a switch at
any time, for any reason. Exercise your rights to insure you get the
best deal!
For more background information on the banks included in this survey, or other banks and savings and loans in the area:
Comptroller of the Currency
Northeastern District
1114 Avenue of the Americas, Suite 3900
New York, NY 10036
212-819-9860
www.occ.treas.gov
This agency handles complaints and inquiries about national banks, and
will investigate all written complaints that imply or reflect a
violation of a Federal banking statute.
New York State Department of Banking
2 Rector Street
New York, NY 10006
212-618-6445 (For complaints or inquiries on state chartered banks)
800-842-6929 (For complaints or inquiries on savings and loans and savings banks)
www.banking.state.ny.us
