Questions to Ask Every Year About Your Bank (or Credit Union)
A codependent relationship is when one person cannot function on their own but instead requires the approval of another. The codependent’s thinking and behavior are not determined by themselves, but rather are organized around another person.
Unfortunately, many people have exactly this relationship with their financial institution. Through their policies, fees, product offerings, and legal fine print, your financial institution determines how you manage your money.
Put Yourself Back in Control
In order to take back control, you choose a financial institution where their policies are based on how you want to manage your money, not the other way around. The following questions will help you determine if your financial institution is the right one for you or if you should switch your accounts to another bank or credit union.
What Are My Current and Future Needs?
The most vital question to ask and answer about a financial institution is whether it meets both your current and future needs. One mistake people make when choosing a checking account is to look for a financial institution that has a good checking account. Wherever you open your checking account will end up being your primary financial institution – the institution that you have the strongest relationship with and do the most business with.
Choosing a financial institution based solely upon their checking product negates the benefits of building a holistic relationship with a financial institution over time. When choosing or switching financial institutions, you should look for a full financial partner rather than just a place to deposit and write checks. Look at their entire suite of loan products, savings products, and specialty services and compare the entire product mix to other financial institutions.
As an example, even if you aren’t looking to buy a house in the near future, you should consider the home ownership products that a financial institution offers, including educational programs, construction loans, and mortgages. For the mortgage, look beyond comparing the interest rates and consider the mortgage program options, down payment requirements, transaction/closing fees, and any special programs you might qualify for.
What many people don't realize is that financial institutions will often look at the history of your relationship with them to determine whether or not to take a chance on you. A financial institution that doesn’t know you can only look at your credit report to determine whether to give you the loan. But the financial institution you have a checking account, credit card, and car loan with can look at all of those accounts to determine your financial responsibility.
Responsible usage of other banking products can spur a financial institution to take a chance on you when other financial institutions may deny you. Having worked in the banking industry, I can't tell you how many times I've heard a CEO or COO say “I don't care if they pay anyone else, I just care if they pay us.”
What Loans Are in My Future?
The next question to answer is what future loans you're planning for and how your financial institution stacks up. In addition to mortgages, consider whether or not you might be looking to start a business, buy a vacation home, or purchase investment properties. Whether your financial institution offers these loan types and knowing how their rates compare is an important consideration when choosing a checking account.
Where Do They Have Branches?
Few people actually examine their needs to visit a branch. Instead, they look for the financial institution with a branch closest to their home. If you rarely visit a branch, then a financial institution located near your house will work very well as it’s likely you’ll only need to go there to open new accounts or apply for loans.
If like regularly going into the branch and talking with real people, you will want to find branch locations near where you work and regularly travel as well. For people who use the branch regularly, having a branch location down the street from work can make it easy to run errands during the week.
Where Are the ATMs Located?
Another important factor is the location of nearby ATMs. Generally, people use ATMs more than branches, but ATM usage is dropping due to advances in mobile banking technologies. Services like mobile check deposit, payment technologies like debit cards and Apple pay, and other conveniences have all made trips to the ATM and branch less necessary.
There are times, however, when you need to pull cash out, and having an ATM nearby that doesn't charge you a fee is an important consideration. Banks like Citibank, Chase, Bank of America, and Wells Fargo have impressive ATM networks spreading across the United States.
Credit unions also understand the importance of ATM networks, and have created their own Co-Op network of ATMs. This network allows a credit union member to withdraw money from any participating credit union ATM with no transaction fees. There are over 30,000 Co-Op ATMs nationwide, nearly double the largest bank’s ATM network. You can download the CO-OP ATM locator app to see transaction fee free ATMs near you.
When looking for ATM locations, make sure to look for locations near where you work, live, travel, and play. ATMs should be conveniently located in places you regularly travel to for entertainment, visiting family, or vacation.
One of our banks doesn't have a lot of ATMs, but they allow us to withdraw from any ATM worldwide and the bank refunds any ATM transaction fees we are charged. Because my wife and I enjoy international travel, we will always maintain our checking account with this bank just to have an account to transfer our travel money into.
What Can I Do Through Online and Mobile Banking?
Online and mobile banking technologies are becoming commonplace with financial institutions, giving you the ability to check balances and deposit checks from your desktop or any mobile device. Some financial institutions also allow you to do much more than simply look at your statements and deposit checks.
The ability to transfer funds from one account to another, pay bills, and even send checks to your family members through the bill pay system are all common features that should be available to you. Because we use multiple savings accounts to help us segment our savings money, we also want the ability to open new savings accounts and rename them online. Identify how you want to manage your money and make sure online and mobile banking will allow you to do what you want.
Do They Charge Me Fees for Things I Do Regularly?
All those random fees are one of the biggest profit centers for financial institutions, and the fees can quickly add up. Think about how you want to use your accounts and make sure your financial institution won't charge you fees for managing your money the way you want.
As example, those multiple savings accounts we use would cost us a lot if our financial institution charged a fee or had large minimum balance requirements on each savings account. So, we only choose financial institutions that offer unlimited savings accounts at no additional cost and with no limitations.
We also pay nearly all of our bills through online bill pay, so having unlimited bill pay transactions with no fees is an important factor in determining where we are going to manage our money.
What Are the Checking Requirements and Fees?
Obviously, when choosing a checking account it is important to consider the fees that you will be charged on the checking account itself. Although it is perfectly legitimate for a financial institution to charge a monthly fee for a checking account, that doesn’t mean you should pay one.
Over 1/3 of all banks and nearly 3/4 of all credit unions offer free checking products to customers. With so many options to choose from, why would you get a checking account with a monthly fee?
Even with free checking, consider what you have to do to get the fee waved, such as having direct deposit. This is an easy way to get free checking for most people, but independent contractors and small business owners may not have the direct deposit option and will need look for a different financial institution.
Another common way to get the monthly fee waved is to have a minimum balance in your checking account. If you regularly keep your emergency fund in your checking account, having thousands of dollars sitting in your checking account makes sense based on how you want to manage your money. But if you keep your emergency fund in a separate savings account or other safe investment, being forced to keep thousands of dollars in your checking account earning 0% is not a wise financial decision.
Minimum balance requirements aren’t necessarily bad though, if they fulfill another purpose. The ATM Rebate Checking account that my wife and I use for travel does require a $3000 minimum balance. Since we count that money as part of our emergency fund and save so much in ATM fees overseas, the minimum balance fits into our financial plan.
Make Your Financial Institution Earn Your Business Every Year
Don't fall into the trap of sticking with your financial institution due to inertia. Make sure you evaluate your financial needs every year to see if your financial institution meets your needs. If you haven’t done this before, you may find that your financial institution isn’t the right one for you.
Don’t change financial institution every year, but over time a change may be necessary as your financial needs and their policies change. Once a year, ask the above questions about your current financial institution. If you like the answers, you can confidently stick with your financial institution knowing your needs are being met.
But if you start to see that the answers you find with your current financial institution don't make you very happy, then use those same questions to find a new place to manage your money.
In just a few minutes a week, you can move toward financial independence. Each week you will receive a simple action item to take to improve your financial situation. Visit our challenge page and commit to build your financial plan one week at a time.