Most people choose a bank early in life and stick with that decision for decades. It’s easy to understand why. There isn’t a pressing need to switch; it seems like such a hassle unless something’s obviously wrong, and even then, what’s the time value of money in exploring better options? The trouble, however, is that where we keep our money actually matters. It impacts interest earnings, fees incurred, quality of service and even how supported we feel when a financial decision comes into play.
It’s not as though banking with more intentionality takes a lot of effort; it just requires an awareness of what to seek out, and a certain level of honesty about what our situations truly need.
Start With What You Actually Use
The first step is getting real about how you use banking versus how it theoretically should apply. Do you need frequent access (in person) or do you do everything online and rarely even think about going into a branch? Do you really only need a checking account and nothing else, or are you essentially running a small business out of your home and need loans, payroll capabilities and a more nuanced relationship with a lending institution?
The worst thing someone can do is assess banks for features they probably will never use. A long list of offerings seems impressive, but if not one of them applies to your situation, it’s not worth it. Start with how you actually use your bank and what you actually need, and then find someone who does that well.
Fees Are Important To Pay Attention To
When transactions are involved, fees always add up. It’s just that many people don’t pay attention to the fine print until they look at an account statement and do the math. Monthly fees for accounts, transaction fees, ATM fees, and minimum balance penalties are all important to understand before signing on to any one institution.
This is especially true of community banks and credit unions, which often have more transparent fee structures, and sometimes better ones than national giants. Spending a few minutes looking at what a community bank actually charges versus what it offers is time well spent, and you can read more on that front to get a clearer picture before making any decisions.
This isn’t to say that fees should determine the decision; instead, they should be taken into consideration because many people overlook them.
Interest Rates On Savings Actually Matter
The interest rate on savings has been an important factor for only a select few seasons in the past decade or two—most recently with inflation—but now it’s an important one to consider again. The difference of even one percent over time, particularly with bigger balances, compounds effectively.
Explore savings rates between a few institutions for an effective comparison before settling. Banks operated online tend to have higher percentages due to expenses not related to brick and mortar institutions, but this isn’t necessarily an effective argument against community banks or local establishments either. When more goods and services are bundled together, a competitive appeal holds weight.
Think About What Happens When Something Goes Wrong
A bank’s true colors show when times get tough. What happens when there’s a line item dispute? How responsive is customer service for any urgent issues? How does a bank interpret clients going through hard financial times who need more understandability instead of strict policies?
Although this is harder to gauge online than fee structures, it’s just as important. Seek reviews from current customers in similar situations or friends who have insights into certain establishments; gauge the overall reputation of these companies within their communities to get a sense of who supports vulnerable populations.
Larger banks are efficient machines but more likely to put you in touch with an automated service instead of a human; smaller institutions often provide dedicated connections more immediate access to someone who can actually help.
Business Banking Should Be Its Own Assessment
For owners of small businesses, personal banking decisions and business banking decisions often overlap but they shouldn’t. Business banking has unique needs: cash flow requirements, credit facilities, payroll options. While your personal bank might work for personal purposes, it might not be the best connection for your professional world.
In fact, community banks often boast better relationships with small business owners. Because they are typically located within certain regions, they have a better scope of understanding for regional industries. Thus they can lend without strict national underwriting requirements. For any businessperson who needs their bank to actually engage with their situation, this distinction matters.
Consolidation vs. Banking At Multiple Institutions
Should everything be at one bank or should you spread connections across multiple banks? It’s a valid debate. Consolidating makes things easier from an organizational perspective, spreading items across different institutions can better cater to differing needs per location.
A happy median likely exists. The best option is one primary connection for personal banking that meets most needs while a secondary account or savings option elsewhere exists if another location offers a significantly better option. Most people do not need more than two banks operating simultaneously to cover their needs and keep things efficient.
Make A Decision That Stands The Test Of Time
The best decision comes when what made sense for the time also makes sense years down the line. This includes stability in terms of established institutions with good reputations and good service that aren’t riddled with red flags upfront with terms making sense from the onset.
Banking is one area where if you do it right, you’ll never have to think about it again except maybe once every few years down the road, but probably not at all in the interim. Upfront effort pays off quietly behind the scenes for years if not decades beyond.
