If you follow the advice of the vast majority of mainstream financial experts, you’ve already begun the new year by taking a second look at your current bank and determining whether you can find a better deal elsewhere.
The following information is essential if you discover that you’re in the market for a new investment vehicle to hold your money. It will help you avoid wasting money, missing out on opportunities to make money, and converting your hard-earned money into fuel for a bank CEO’s private jet.
Bad banks pay you less than the value of your deposits are actually worth.
There is no such thing as high-yield savings account in the modern era if the rate of inflation is the yardstick for determining what is considered “high-yield.” Despite this, there are yields that are poor, and then there are yields that are truly poor.
According to the Federal Deposit Insurance Corporation, the national average annual percentage yield (APY) for a savings account is 0.06 percent, but it can be as low as 0.01 percent.
According to this calculation, the difference between 0.01 percent interest and 1 percent interest is equal to the difference between 50 cents and 50 bucks for a $5,000 balance compounded over one year.
Yes, interest rates are at historically low levels, but don’t be fooled into thinking that “they all stink, so what does it matter.”
It is extremely important. Take your time and look around.
Rates aren’t everything; fees have the potential to quickly deplete yields.
However, while interest rates are important because of the snowball effect of compound interest, you’re usually talking about differences that amount to a few dollars per year at the most.
It only takes a single fee to wipe that out, and with some banks, a laundry list of fees is included as part of the overall package.
It may be time to switch banks if you’re being charged minimum balance fees, service charges, or overdraft fees on a regular basis, according to Carter Seuthe, CEO of Credit Summit.
Keep in mind that fees can be triggered by mistakes on your part, so when bank-shopping, be aware of your own limitations and limitations.
According to Stephan Baldwin, founder of the Assisted Living Center, “If you have a habit of over-drafting, make sure you choose a bank that does not charge you a fee for doing so,” said Baldwin. Some financial institutions have completely eliminated or reduced their overdraft fees, despite the fact that this may not be widely known.
However, unless you are in desperate need of savings, do not pay the bank to save you from yourself.
According to Baldwin, “if you’re not prone to over-drafting, make sure you remove the protection options because they typically have a monthly fee,” he added.
With some financial institutions, the sales pitches never stop.
The fact that your bank offers savings and checking accounts means that it is most likely to also issue credit cards, sell insurance, and provide home and auto loans. Signing up for one shouldn’t obligate you to put up with constant shilling for the rest of them.
According to Blaine Thiederman, CFP, and founder of Progress Wealth Management, “oftentimes they will attempt to sell credit cards that you do not require, and in doing so will more often harm you than help you.”
Remember that even if you are in the market for a credit card, loan, or whatever else your bank may have to offer, you may be able to get a better deal somewhere else if you shop around. In this case, as in the previous one, doing your homework, shopping around, and remaining skeptical are the best solutions.
The question to ask yourself when working with anyone to improve your financial situation is: Are they on your side, or do they see you as a prospect? Thiederman shared his thoughts. “It’s not safe to trust anyone who views you as a potential customer to sell to.
“Never forget the phrase ‘trust but verify’ when dealing with your finances, regardless of the situation.”
If the individual or company with whom you are working consistently provides you with accurate, thoughtful, and well-intentioned recommendations, you can be confident in their abilities. It’s probably not a good idea if someone tells you that you need seven bank accounts, each of which has a maintenance fee.”
Poor customer service is not only inconvenient, but it can also be costly.
The GOBankingRates Best Banks of 2022 study found that less than 7 percent of people consider customer service to be their top priority when shopping for banks, the lowest percentage of any category by a significant margin.
It’s possible that the 7 percent are on to something.
Although customer service is only indirectly related to your finances, it is still related, and by choosing a bare-bones bank that scrimps on service in order to increase rates, you may be choosing the wrong bank.
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Shawn Plummer, CEO of The Annuity Expert, explained that poor customer service can result in you not being able to get your requests fulfilled, which can result in charges and fees. “Having a bad relationship with the bank can also make it less likely that you will receive fee waivers.”
Make sure that your bank is still your bank.
Mergers and acquisitions are such a common occurrence in the financial industry that your mortgage — or even your entire bank — may be transferred without your knowledge until after it has occurred, which can be very bad news.
“If your bank merges with another financial institution and this results in drastic changes, such as the addition of hidden fees, increases in charges and fees, and higher interest rates on credit lines, you could suffer financially,” said Karen Condor, a finance expert with USInsuranceAgents.com.
“You could suffer financially if you choose the wrong bank.” “In addition, when a smaller community bank merges with a larger bank, the types and availability of credit lines, particularly for small businesses, are frequently reduced.”
Always make sure to read the fine print.
For the final point, while some banks have policies that are perfectly legal and not necessarily deceptive, they can still catch you off guard and put you in an uncomfortable financial situation if you are not aware of them.
In the words of Christine A. Kingston of Surf City Lawyers, “Choosing the wrong bank can hurt you financially because they can take money from your checking account when you’ve intentionally needed to skip a payment that month.”
When you have a credit card with a bank, credit unions are notorious for deducting money from your checking account to pay for the card. They do it automatically under the pretense of attempting to assist you because you forgot to do something.
Under the terms of a cross-collateralization clause in a contract, they can also hold your credit card debt hostage; however, the only time this is enforceable is if you take out both an auto loan and a credit card at the same time.”