Monday, June 7, 2010

Which bank is best for you?

If there was one bright spot within the darkness of the mortgage crisis, although one would have to borrow Pollyanna’s glasses to find it – it would be that banks have gone through a process of attrition. And survival of the fittest has hopefully left us with better regulated financial institutions that we can, dare I say, trust… to not only safely hold our money for us, but have our best interest in mind when selling us their various loans and other products as well.

I have been a member of a credit union for most of my working career (the last 15 years or so), mostly out of default. I worked at the very same credit union while I was going to college and at the time it was simply the convenient thing to do. Upon graduating college and taking on other jobs my reason for banking at my former employer went from convenience to just sheer laziness. I worked and consulted for many other companies that did not offer direct deposit which made it extremely inconvenient for me to have to drive to one of only two branches that were located within the general vicinity of where I lived, let alone where I happened to be working at the time. As for- profit banks began to offer similar products to better compete with their non-profit counterparts, the benefits of being at a credit union became negligible at best. Most credit unions went from “member’s only” to “all are welcome” in an attempt to capture more members. Recently, I finally stopped procrastinating, and began the tedious process of moving banks. After researching various banks and what they had to offer, and asking friends and family about their banks and what their experiences were, I decided to open an account with Chase Bank (which took over Washington Mutual) mainly because I felt like they were the right fit for the kind of accounts I would have and the kind of products I was interested in. Here are the things I discovered about Chase and other banks that might be the right fit for you.

Credit Unions- Credit unions operate as a non-profit, cooperative financial institution. Credit unions are insured by The National Credit Union Administration (NCUA) rather than the FDIC (Federal Deposit Insurance Corporation).Traditionally credit unions have certain requirements in order to become a member. Some of the more common requirements were being part of a certain community or specific industry, or having to be referred by an existing member or employee. Today restrictions have softened significantly, and most credit unions accept walk in members with little or no restrictions.

PROS- Since credit unions perform under a non-profit title they are exempt from federal taxation, which allows them to offer higher interest rates on savings, CD’s or money market accounts. And lower rates on loans. Some also act as a “one stop shop” offering other non-banking services like property and casualty insurance and financial services. Plenty of no fee or free checking and savings accounts.

CONS- Very limited branches can make banking a chore. Limited branches also translates into limited ATMs as well, which means having to pay up to $5.00 in fees every time you withdraw cash from a non-credit union sponsored ATM machine. Also, credit unions do not offer the same type of reward programs when it comes to debit and credit cards that other commercial for-profit banks do, like cash rewards on certain debit card purchases. Loan rates are becoming competitive across the banking industry and one could always open an account at a credit union simply to apply for a loan if need be. No live 24/7 phone support, limited online banking presence.

Chase Bank (formerly Washington Mutual) offers a variety of services and more importantly in my case, far more branches than the credit union I used to belong to. The investment history of JP Morgan Chase allows them to be competitive with credit unions when it comes to offering loans and investment products.

PROS- Many branch locations to chose from, low minimums for opening accounts. Great programs for people who like to use debit cards over credit cards. Cash back programs on debit cards was one of the biggest reasons why I decided to open an account with them. They also have a strong online presence and cater to the technologically savvy by offering text messages for low balance warnings or fraud alerts.

CONS- free checking is only offered to those with direct deposit, but could be waived if debit card is used at least 4 times a month.

Bank of America- It’s estimated that 1 out of every 3 people in the U.S. have an account with Bank of America. They are the Seven Eleven of banks with a location at virtually every street corner.

PROS- Surprisingly high customer satisfaction rate. Over 20,000 no fee ATMs, with branches conveniently located all through out the country. Strong online banking presence with state of the art check scanning features on all checks deposited via ATM.

CONS- lots of various fees that seem to pop up out of nowhere. No free checking without direct deposit and charges apply if you see a teller more than 3 times in a month. Seems to encourage that members stay online rather than in line. General vibe deters anyone from actually coming into a branch.

Wells Fargo-Bank that markets itself on traditional values. Does not have the same omnipresent feel as BofA and Chase. Known just as much if not more so as a lending institution as it is a depository bank. Managed to steer clear of the mortgage crisis by opting not to participate in sub prime loans, leaving them one of largest mortgage lenders in the U.S.

PROS-Better than a decent amount of locations and reputation of high quality customer service. Great selection of loans and other financial products. Many different account packages from “Basic Checking” and “College Combo” to “Complete Advantage Checking” Ideal for homeowners and small businesses.

CONS-High fees, “Basic Checking” does not offer free checking or free online banking. Typical savings and checking accounts looked at as secondary priority to loans and mortgages.

Moving banks is almost like moving houses. You have to take the time to look for a bank that is the right fit for you, it has to be the right size with a layout and structure you are comfortable with and could build on in the future. And when all else fails, just remember that it’s all about location, location, location.

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