Are you looking for another financial institution to handle your fortune? Here's what to ask.
If you're among the many customers fed up with high bank fees, poor service or low interest rates, you may want to switch banks or trade your bank for a credit union.
"You used to just decide if you wanted to get a toaster or a microwave when you opened a new account, or go to the bank with the most convenient branch," says Mitchell Freedman, the CEO of MFAC Financial Advisors in Westlake Village, Calif. "Today, bank fees can hit you in ways you never thought about, so you need to carefully compare your continuing costs of banking."
Making that comparison isn't so simple.
"Among the 12 largest banks, the median number of bank disclosure pages for checking account policies and fees is 69 pages. Believe it or not, that's an improvement over 2011, when the median was 111 pages. There's no way a consumer could wade through all that," says Susan Weinstock, project director for Safe Checking in the Electronic Age, a project by the Pew Center on the States in Washington, D.C.
The following seven questions can help you find the bank that fits your financial needs.
HOW LARGE A BALANCE IS NEEDED TO AVOID FEES?
To make it easier for consumers to comparison shop, the Pew Center developed a simple disclosure form that five of the largest banks and three of the largest credit unions have adopted, Weinstock says. Consumers need to know the minimum deposit required to open an account and the minimum balance required to waive monthly bank fees."Be aware not only of the upfront price of opening an account but of continuing requirements," Freedman says. "Some accounts require a direct deposit or a recurring payment through their site to avoid monthly service fees."
HOW HIGH ARE THE FEES FOR OUT-OF-NETWORK ATMS?
"Most banks and credit unions participate in a network of ATMs, but if you rely often on an ATM for withdrawals, you should check on the fee for using an out-of-network machine," Weinstock says. "Usually there's no fee for using one in your bank's network, but your bank or credit union should disclose the fee it charges for using another network. There's also a fee from the ATM owner, and that will be disclosed on the ATM itself."Freedman says consumers who travel frequently should consider opening an account with a national bank that offers ATMs around the country.
"ATM fees may be less important to people who don't use them a lot or who choose a bank or credit union with an ATM convenient to their work or home," Freedman says.
WHAT ARE THE OVERDRAFT PROTECTION OPTIONS?
While you may hope you never have to rely on overdraft protection, you should make sure you understand your options and their costs before you switch banks.Weinstock says many consumers don't understand that not signing up for overdraft protection could be a good thing. Your debit card will be declined or your check will bounce without it, but there's no fee if you opt out of overdraft protection.
"If you opt in for protection, the cheapest way to do it is usually to have funds transferred from a savings account, a line of credit or a credit card. The median transfer fee is $12, and the median overdraft fee is $35 per transaction," Weinstock says.
Consumers should compare the transfer fee, overdraft penalty fee, maximum number of times an overdraft penalty fee is applied per day, minimum amount required to trigger an overdraft fee and extended overdraft penalty fee charged for each day the account is overdrawn.
"Overdraft protection is a double-edged sword," Freedman says. "It can be terrific and enable you to lower your risk of a bounced check, but you could end up paying a high transaction fee and a hefty interest rate if you sign up for a line of credit."
HOW SOON ARE DEPOSITED FUNDS AVAILABLE?
While some banks put a hold on certain types of deposits, Freedman says some deposits are instantly credited.Weinstock says financial regulations require the first $200 of any deposit be available the next business day following a deposit, but banks vary in how soon the rest of the deposit is available.
"Fund availability is extremely important, especially for people living paycheck to paycheck," Weinstock says. "Some banks say the business day ends at 2 p.m., so you need to check that information in their disclosure boxes."
Weinstock says you also should find out the bank's process for handling deposits and withdrawals. Most banks process deposits first, then the withdrawals from the same day, but others credit deposits last.
"Some banks handle the largest withdrawals before smaller ones that come in on the same day, which can make it more likely that you'll overdraw multiple times," Weinstock says.
