Responsible and Generous Living in Early Adulthood

But a poor widow came and put in two very small copper coins, worth only a few cents. – Mark 12:42

Thoughts on Finding the Best Bank

A Big Decision

When Krista and I got back from our honeymoon we went through the process of joining our lives together. Our vows emphasized that we wanted to share everything and when we got home we experienced first hand what it takes to ‘share everything.’ In the weeks following our honeymoon we began the process of joining. We went to our state social security office to get Krista’s last name changed (a decision I left up to her), we went to the DMV to get her license updated, I moved my stuff into our new apartment and finally we chose a bank. We had agreed that after we were married our finances would be shared, and we would have joint accounts. We wanted as much accountability as possible with our money, and having everything together ensured this. What we didn’t anticipate was how important and challenging choosing our bank would be.

Choosing your bank is a significant decision, and one which we usually determine very early in our financial lives. Many people I talk to are still with their first bank, the one they walked into with their parents to open their first account. While I am all for loyalty, it doesn’t make sense to stick with your bank just because you’ve been with it for years. That’s like saying ‘I’m still going to wear my 1980’s neon camouflage pants because I’ve been wearing them for years.’

I would wager that you are certainly much different than you were when you opened your first savings account, and your choice of a bank should reflect who you are currently, not who you were then or who your parents are.

Switching banks may be a great fiscal decision, especially when you know what you’re looking for.

Advantages and Disadvantages of Traditional Banks

My introduction to banking was a savings account with Bank of America, it also gave me my first piece of plastic, an ATM card. My parents opened it for me when I was 12 so I could deposit my first paper route paycheck. I thought it was so cool that I could go to an ATM, insert my card and get money, and so did my friends. I kept that account until I was 24, and I’ve talked to several people who have had a similar story.

There is something about big banks, Bank of America, Chase, Wells Fargo, U.S. Bank that makes us feel safe. They have an extensive network of branches and ATM’s, we see their ads on TV, they are a known commodity. Many people trust them with their money for these reasons. Yet what we’ve seen in recent history with companies like Fannie Mae is that even the big boys can go under. While these large traditional banks have some advantages, they also have some striking disadvantages.

Here are some of the advantages of traditional banks:

  • You get access to a large ATM network, often including international ATM’s.
  • Many of these banks have hundreds of branches, allowing you face to face interaction for your banking needs.
  • They are very convenient for travelling, you will often find them wherever you go.
  • They allow you to have all of your accounts “in house” including your mortgage, investments, credit cards and retirement accounts.
  • Money kept in them is FDIC insured up to $250,000, if the bank fails your money is insured up to this amount.
  • They offer online banking options including direct deposit, bill pay, online transfers and mobile deposit (allowing you to deposit checks with your smartphone).

Here are the disadvantages of traditional banks:

  • They offer some of the lowest interest rates for savings and checking accounts.
  • Since they are for-profit companies they have fee’s associated with each of their accounts, including maintenance fees, low balance fees etc. They have to make money from having you as a customer, and fees are a key way they accomplish this.
  • Losing an individual customer doens’t hurt them very much, thus their customer service is often lacking.
  • They often have higher minimum investment amounts for the accounts they offer.

The Power of the Credit Union

Our bank of choice is the credit union and this is where we bank. When Krista and I joined our accounts together we went with a credit union mainly because they don’t exist to make a profit. A credit union is a member owned financial cooperative, controlled by its members for the purpose of providing affordable financial services. If you want a more thorough explanation here is an article from the world council of credit unions. Also if you are looking for a credit union in your area here is a helpful search tool where you can find one close to home. We have been with ours for two years and we definitely won’t be switching. It is refreshing dealing with an organization that isn’t after your money and doesn’t charge you any fees.

Here are some of the advantages of credit unions:

  • Most will reimburse your monthly ATM surcharges, allowing you to freely use the ATM”s of other banks.
  • Credit unions offer you incredible customer service because they exist for their members.
  • In many instances the leadership board of your credit union will be filled with people from your local community.
  • The best credit unions offer the same accounts as big banks including savings and checking accounts mortgages, investments, credit cards and retirement accounts.
  • They offer better interest rates than big banks on most of their accounts, especially savings, checking, and credit cards.
  • Money kept in them is NCUA (National Credit Union Association) insured up to $250,000, if the bank fails your money is insured up to this amount. This is the equivalent of FDIC insurance offered by banks.
  • They offer the same online banking options as big banks including direct deposit, bill pay, online transfers and many times mobile deposit (we can’t vouch for every credit union, but ours definitely does).

Here are the disadvantages of Credit Unions:

  • They aren’t as accessible when you travel, they are localized in the community they serve. 
  • If you move far enough out of your area it is likely you will have to switch banks.

Advantages and Disadvantages of Online Banks

A new phenomenon in banking today is the online bank. Some of these include Ally, ING Direct, and PerkStreet. These banks exist solely in the online world, and are really designed for people who don’t need to have any physical connection with their bank.

Here are the advantages of online banks:

  • In many instances your monthly ATM surcharges will be reimbursed, allowing you to use ATMs of other banks.
  • They offer many of the same services as traditional banks, including debit and credit cards.
  • Money kept in them is FDIC insured up to $250,000, if the bank fails your money is insured up to this amount.
  • They have superior interest rates for checking and savings accounts and in most instances have no-fee accounts.
  • They specialize in online banking options including direct deposit, bill pay, online transfers and mobile deposit (allowing you to deposit checks with your smartphone).

The disadvantages of online banks:

  • You get no personal contact because these banks don’t have physical branches. 
  • If you happen to find yourself without internet access, you lose all contact with your bank.
  • These banks are still for profit companies, so their interest rates will lag behind their credit union competitors.

Ultimately the choice is up to you. Hopefully this post provided a little more insight into what you’re getting with different types of banks, but it’s really a matter of assessing your needs and finding the bank that fits them. Not settling just for what you know.

Tell us about your bank, what do you like about it? What has kept you there or prevented you from switching? 

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8 comments on “Thoughts on Finding the Best Bank

  1. Anonymous
    May 20, 2013

    What I found works best for me:
    Hold credit card accounts at the Traditional Big Banks, for fraud and security protection. Get the fee’s waived by instituting a “Direct Deposit” from my employer.
    Do the rest of my banking through an Online Bank/Online Brokerage. The money in my “Savings” and “Checking” accounts are doing great thanks to the stock market.
    Also, it takes a few days, but its fairly easy to transfer money between the two banks Via an ACH connection (basically an electronic check).

    • jkmaroni
      May 20, 2013

      Sounds like you have found a good balance by utilizing some of the best features of a big bank, and an online bank. We prefer to have all of our accounts with one credit union for the sake of simplicity, but not everyone chooses to do it that way. Direct deposit and ACH transfers make it much easier to have your money at multiple banks.

  2. Dan K
    May 20, 2013

    I still use a big bank (started in college), but plan on switching to a credit union after paying off a line of credit at my bank. Thanks for the additional info!

    • jkmaroni
      May 20, 2013

      That sounds like a great plan Dan, we found the rates to be much superior at the credit union having both come from two of the biggest banks. I wish I would have kept one line of credit open at our previous bank though, not really to use so much as to have a long-standing credit card for my credit score. I thought it would be better to just make a clean break, but I’m not sure I would’ve done it that way if presented with the option again. Thanks for your thoughts.

  3. Eric
    May 20, 2013

    Have to check to see if your Credit Union is with the Share Branch Network. Check it out here http://www.cuswirl.com this is how smaller more localized Credit are getting out nationwide. Also there is the COOP network that allows credit unions to share ATM’s you can check it out here http://www.co-opnetwork.org these are some of the ways Credit Unions are competing with big banks. Making credit unions more accessible nationwide.

    • jkmaroni
      May 20, 2013

      Thank you Eric, it’s helpful to know what options there are for us as members of a credit union, particularly in the event we travel or move. We’ll definitely be looking into COOP and cuswirl.com.

  4. jaysaynayyay
    May 21, 2013

    I’m so glad that you two are writing this blog about money issues. I just stumbled on it today and I am so impressed. the topics are insightful and relevent to what I struggle and stress over each week. In regards to Credit Unions, Eric’s comment I think is very helpful. I started using a Credit Union when I got my first job at fourteen but when I moved away to college my credit union was not part of the coop network and so when I tried to go into the credit union in my college town, Newberg, the cashier couldn’t help me out. It was a long three month process that ultimately ended in me pulling my money out of my credit union back home and putting it in a big bank. I’m glad I did since in my early adult life I’ve moved 6 times and my bank always had branches wherever i went but sometimes I have bankers remorse because of all the fees. Moral of the story: as a young adult It is really important to check CO-OPnetwork prior to banking at a credit union because young adults tend to move around frequently as we try to figure out what life looks like for us and how to live out our values.

    • jkmaroni
      May 21, 2013

      The lack of access when you move is definitely one of the disadvantages of credit unions, and the advantages of big banks. Since we knew that we were going to be staying put for more than 3 years, switching to a credit union made sense for us. If you think you will be moving around a bit (which can be a hallmark of early adulthood) then a big bank may be best for you. Do you have a job that moves you periodically? Your story is a good reminder of that and also a reminder to check the CO-OP network to see if you will be able to have access to your money via a partner credit union.

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This entry was posted on May 20, 2013 by in Managing Finances.
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