Monday, September 17, 2018
What to Look for When Choosing a Bank…and What Not to
Choosing a bank is like choosing a port-a-potty, they all pretty much smell the same. Sadly, we live in a world where having a bank account is pretty much a necessity. Buying something at a store, or online, or even having a job requires you to have a bank account. So, in this precarious position, who do we choose? Today I will show you 5 things that are important when choosing a financial institution and 5 things that are not. Hopefully, this will help you narrow your search or even raise some questions about your current bank.
This is first for a reason. I hate paying bank fees like I hate a colonoscopy. Actually, I hate them more than a colonoscopy. At least the doctor has the decency to put you under when he puts the camera where the sun doesn’t shine. With banks fees, you are wide awake for the violation. I am of the belief that no bank should charge fees for the “privilege” of using their services. The reason I believe this is because any dollar I have sitting in savings is a dollar that the bank uses to lend to others, including myself. They are literally making billions off our savings and they want $15 at the end of the month. Doesn’t seem right to me. You must find a bank that charges little to no fees. They do exist and when you are starting out it is very important. Develop the mentality of hating bank fees so it will propel you through life. To me, it’s the principle of the matter. For you, it should be too.
2) Physical Locations
Call me old school, but I like to be able to go into a bank here and there. Why is this important to me? I would actually rather take 30 minutes of my life going to a bank to get something done then waiting 30 minutes on hold and not know if it got done or not. That to me is very important. When the bank messes up, and they will, it is good to be able to see an actual face to get it straightened out. There are a lot of online banks now and the reason for it is simple. It is not to better your life or service level, it is because they want to save money on a physical location and people to work at it. Don’t let them off the hook. Bank at an actual bank.
3) Customer Service
I put this third, but it could be first in my opinion. Customer service is very, very, very important. Very. Again, when the bank screws up, it is always nice when there is someone pleasant on the other end fixing it. In my bank, they remember my face, which is nice. They know not to try to sell me their crap, which is even nicer. They know I like to be in and out and I don’t mess around. That to me is priceless. I realize working at a bank must suck, but the ones I see at my bank are very pleasant and that is nice. I hope when they are off work they enjoy themselves. 8 hours a day there must be torture.
I was late bloomer regarding this, but convenience in banking is an absolute must. They must have a decent online portal as well as mobile banking that is robust. Let’s be honest, once you learn their interface you will rarely ever have to step foot in a bank. The CEO’s are happy because they can layoff people and you are happy because you can bank in your underwear. While I do think physical locations are very important, I also believe online banking is as well. A solid combination of the 2 is key.
Here in Canada, we have our 5 Major Banks and a wide variety of other banking institutions. I won’t expose the bank I use, it’s green if that helps, but they gave me a signing bonus when I joined them. I got $300 deposited into my account just for coming to them. How important is that to me? Not very important to be honest but here is why I mention it. I needed to switch banks, and their only requirement was that I get my paychecks deposited to that account for 3 months. Well if I am switching banks anyway, I will take free money. Side note: Do not join a bank just because of a silly perk and always read the fine print. If it is something you are going to do anyway and there is no hidden legal mumbo-jumbo, why not take advantage of free stuff. If they give rewards for just being there, free is free.
What’s Not Important?
1) Interest Rates
So, so, so many people I know, tell me about their amazing interest rate on their bank account with Bank X. Many will offer you an introductory rate just for signing up. The big question you must ask yourself is this: Do you know what 2.5% for 3 months is? If you move over $10,000 into one of these “high interest” accounts, for that 3-month period you will get an extra $60 bucks. Is that $60 worth everything else I mentioned earlier in the post? I don’t think so. Also, if you have $32 in savings, why is high interest important at all to you? The only people it should be important to are people with large bank balances, and those people get far better interest rates than us average folk get. What is more important than interest rates is saving money, at all, period. When you are young, or even older for that matter, the bulk of your initial savings will come from your contributions, not interest. Focus on developing strong savings practices, it’s far more important.
2) Product Line
Many people I know will join a bank for a specific product they offer. Just a heads up, every bank pretty much offers the same things. Not only that, there is nothing wrong, and in fact, I encourage it, having certain products outside the bank. You owe them no loyalty and in fact, they owe you. Shopping around can save you money. Using outside experts is often much more convenient. Sadly, the mortgage guy or investment advisor you deal with at the bank probably won’t be there the next time you need them. Focus on the first five fundamentals, not a wide variety of products you will probably never need.
My bank once told me I should come in and take advantage of their “Super Saver” account. This account, with an “amazing” interest rate of 0.55% was meant for people with large balances and people like me were flying to it. What they failed to tell me was that if I had even 1 transaction from that account in a month, I got charged a $25 fee. What an amazing account! You put money in and get dinged whenever you take it out. I personally never count on advice from my bank. The reason is simple. People who work at banks have a tough job. They must be a teller, an investment advisor, a debt specialist and a mortgage broker all in one day. They are stretched way too thin to give you any sort of expert advice. You are honestly better off googling any advice you might need, or you can always read my posts… 🙂
4) Who Works There
You should never choose a bank based on who works there. The mechanism of the bank is far too big for your buddy from university to make a difference with your life. The best they can do is be pleasant to you when you come in, which is important. Unless your mom or dad is the bank manager, choosing a bank because someone you know works there is foolish. Furthermore, it might be better in some cases to be just a number instead of “Sandy’s niece.” Some things are meant to be kept private and should only be discussed when trust is the underlying factor. A gossipy friend is not a good friend.
5) A Cool Ad
My bank, remember the green one, has some pretty good ads. Some hipster with a beard talks about how he is there for me and how unique I am. It is hard to feel unique when I am waiting in a line 15 deep to speak to a teller. Never choose your bank based on ads. They don’t care about you, you aren’t unique to them, and you aren’t special. They don’t care about the Toronto Maple Leafs or the Toronto Raptors. They only care about money and their shareholders. Having their name on a jersey or on a stadium is done because some people are foolish enough to think the “Official Bank of the Cleveland Browns,” means something. All it means is that some rich dude and some other rich dude shook hands and they both got even richer. Focus on what’s important, not what’s trendy.
Sadly, with the way the system is now the banks are so big that they don’t have the structure to handle your specific needs. Do your research, focus on the key points, and don’t get caught up in the hype. In all reality, it is a simple interaction. Put your money in and take your money out. Whoever makes that as easy as possible should have your business.
“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.” – Robert Frost
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