11/19/2012 7:30 PM ET|
6 things to know when picking a bank
Before you choose a bank, you need to know if it offers the services and products that will benefit you the most.
Should you trust your banker to watch out for you?
Not always. They have incentives and goals to meet, such as referring a specified number of clients each month to a department that handles mortgages or car loans, says Robert Laura, the president of Synergos Financial Group in Howell, Mich.
The dilemma: A banker's bottom line may not be the same as yours. "For banks, it's about gaining wallet share," Laura says.
The remedy is to know exactly which banking products you need. Here are six things to keep in mind when shopping for a bank:
Deep pockets get deeper rates. Many bank programs have tiered interest rates for higher deposits, Laura says. For example, jumbo certificates of deposit, which usually require $100,000 for a minimum deposit, typically offer higher yields than CDs in smaller amounts, he says. "Bankers want to capture more dollars," Laura adds.
Multimillion-dollar clients may even get additional insurance above the $250,000 deposit limit set by the Federal Deposit Insurance Corp. How? A bank may offer a certificate of deposit account registry service, or CDARS, says Greg McBride, a senior financial analyst at Bankrate.com. Banks belonging to the CDARS network let wealthy investors spread large CD deposits among different banks so each one is insured.
Currently, more than 3,000 financial institutions -- mostly medium-sized and small banks -- offer this extra insurance protection.
Overseas banking is costly. If you plan to travel often, beware of extra ATM costs. Bank of America belongs to the Global ATM Alliance, which offers free ATM withdrawals internationally at member banks. This can reduce fees overseas if you have an account at one of those banks. But banks that don't belong to the alliance may charge processing fees, which can quickly add up.
In certain countries, you might be charged differently if you use your debit card as a credit card. Ask your bank what these additional fees might be before you travel overseas.
Be aware that you may not see these fees until you get your monthly statement, says Paul Schaus, the president of bank consulting firm CCG Catalyst in Phoenix. "Read your account disclosure statement before you go," he says.
Your bank branch manager is your friend. Longtime customers with multiple accounts can secure better account deals, such as getting fees waived or nabbing higher yields, McBride says. "And branch managers have the power to negotiate them."
Some banks even have overdraft-fee waiver policies, granting a set number of two or three each year. Still, repeat offenders are less likely to get waivers.
Also, online banking customers may get better terms than in-branch bank customers. The reason is the bank's lower cost of service online, and those savings can be passed along to customers, McBride says.
"Everything is negotiable," Laura says. "You may get a five- or 10-basis point increase on a CD yield, if you ask."
Schaus says smaller banks and credit unions are the most likely places to get higher rates and waivers. "When dealing with big banks, you're just a number," he says.
Credit card default rates can bite. Banks may charge an annual percentage rate on a credit card as high as 30%, Laura says. And the reasons for such high rates can range from missing a payment window by just one day to skipping a payment. To find out what penalties can be levied, check the credit card pamphlet that states terms and conditions, he says.
"When reading it, you may wonder why anyone uses a credit card," Laura says.
Package deals may not be deals at all. Relationship pricing, where banks reward consumers with multiple accounts, may be more beneficial for consumers than having a stand-alone bank account, McBride says. "But you still need to shop around," he says. "Compare each account against the competition."
Bankers usually hold the upper hand in disputes. Some banks put clauses in their contracts that mandate the use of arbitration rather than jury trials when disputes arise.
"Banks would rather go through arbitration than trials, because jury members see deep pockets when judging a company," Schaus says. Arbitrators tend to compromise more, he says.
Bankrate's McBride offers this final tip: Become an educated consumer, so you can discern a good offer from a less competitive one.
More from Bankrate.com:
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Wells Fargo............I don't recommend them. They ask for two forms of ID to DEPOSIT a check. In my OWN Wells Fargo account. Why ID for a deposit??
I put $70,000 in my account and they told me I needed to open a second checking account and not give out that number, or write checks to it. I asked 'Why do I need two checking accounts?' They said that I could keep money in one, and then transfer it to the other one so people don't steal it...?????
I then asked what kind of interest I could get on a 1 year CD? They said, .4%. Yes that's point 4 percent. I owed about $100,000 left on my mortgage. I paid that down and earned 5% on it (That was my mortgage rate).
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