One of my money resolutions is to switch banks. I've been a long-time customer of a big bank that, in recent years, has stood out among headlines that reveal sneaky and unethical business practices. That's not the only reason I'm switching, but it does help me want to change. So, it has got me thinking bank vs. credit union?
Some people think credit unions aren't terribly convenient -- maybe they don't have online banking, or maybe it's hard to find an ATM when you're traveling. But I've found that, despite the potential inconveniences, there are advantages to consider when it comes to a credit union. Here are a few things I'm keeping in mind as I make my decision.
How great would it be if you could get a better return on your savings? What if you could get a rate 300 times higher? Of course that'd be great! Who doesn't want more money?
But if you just opened a money market account with the local big bank branch, or you signed up for a credit card to get the free T-shirt, you might be leaving money on the table or paying sky-high fees. And even if your account was the best available at the time, product offerings change so often, it's hard to keep up!
Note: See also How to Choose a Credit Card for tips on finding the right credit card for you. Our partner site CardRatings.com also has articles to help you find the right card be it a cash back credit card or balance transfer credit card. Their Credit Card Comparison Table also allows you to easily search dozens of current credit card offers.
Last year, I wrote a breakup letter to Chase Bank. It was pretty ugly. I'll save you the heartbreaking details, but trust me, they had it coming.
Closing the account was another nightmare. They wouldn't let me break up with them! They told me I couldn't close the account because my signature on the request form did not match the signature they had on file. An understandable concern, but I'd been signing my name as either a squiggly line or "The Hawk," for the past few years, so I don't really understand why my signature had suddenly become so important.
It took months. But my account was finally closed, and I've been recovering nicely since the breakup. I'm in a new relationship with a financial institution that I can trust, depend on and, most importantly, I rarely have to call for anything.
Did you ever look at a bank's website and think to yourself, "Why would they give you free bill pay when they charge for everything else?" Even with the super-restrictive accounts that limit ATM deposits and withdrawals; put holds on most of your checks; and demand monthly fees or regular savings transfers; bill pay is usually offered free. It's surely not an inexpensive process from the bank's perspective; there's the technology and software required for processing and security and for many payees the bank is eating the printing and postage costs. (If I was a betting woman, I'd put lots of money on the suspicion that, per transaction, bill pay is far more expensive than, say, overdrafts due to debit card transactions, for which banks charge more than $30 per instance.)
Why BofA Thought Debit Fees Would Fly
When Bank of America first announced they would charge fees simply for the use of the debit card (the bank later reversed its decision) it was a calculated risk based on the belief that their large ATM network and, most importantly, their freebies had their hooks in customers.
"They're hoping that people will throw up their hands and be willing to pay $5 a month to spare themselves the hassle of changing," said Ron Lieber of the New York Times in an interview on NPR's Talk of the Nation. The hassle isn't with changing direct deposit routing and buying new checks and vanity debit cards — it's more about changing bill pay. "People have gotten used to having their credit card bill paid from their bank account and paying their utilities and maybe there's a direct connection between the school or a tuition payment plan. And, you know, by the time you're done, you've got 10 or 12 different tentacles into the account, and you start to believe that it's going to be really complicated to extract yourself." Continue reading...
Bank of America will soon be charging $5 per month for consumers who use its debit cards to access the money in their accounts. This fee, to be charged whether you use your debit card once or several dozen times, is a direct response (a kind of "up yours," if you ask me) to the recent limits on what banks can charge merchants for debit transactions, and a less direct response to rules on allowing debit card transactions to clear, triggering overdraft fees if consumers don't have enough money to cover them.
Banks make big money from fees of all sorts; this is something I've instinctively known since I was in college and paid some nasty overdraft fees of my own. Once, the tiny pub for which I was working was struggling so badly that my $23 waitress paycheck bounced — triggering a $27 fee. This caused another fee when a check I wrote bounced. Double ouch! Continue reading...
I earned $200 in less than an hour the other day, without removing any of my clothes. A bank gave me the money (or will, a few months from now) in exchange for opening a business checking account.
Why would a bank or a credit union give away that kind of money? To get people through the doors.
Once you're there, bank officials hope you'll take advantage of their other services, making you a loyal and profitable customer. Not to make that $200 sound like a gateway drug, but once a bank has you chances are you'll be hooked. (Not always, though. More on that later.)
Did anyone ever give you a user's manual for your checking account?
Probably not. There are best practices in managing a checking account, but even if you learned the rules from your parents or through your own hard-won experience (or if you never did), it may be time for a little checking account check-up.
Why? Because some of the rules for checking accounts no longer apply. Financial regulation, market conditions and technological developments have all changed some of the ways you should think about managing your checking account.
In a rocky economy, high interest rates are the holy grail of conservative investors, especially those who don't want to invest in bonds. But in this rocky economy, "high interest" hasn't really meant much: High-interest savings accounts are returning below two percent!
Get Rich Slowly readers are just like everybody else. A couple of times a week, I get e-mail from somebody looking for higher interest rates, but puzzled about where to find them. So, inspired by a recent article in Consumer Reports Money Adviser, I'm going to run down the top choices for finding high interest rates.
First, I want to remind you all of one thing: Interest rates aren't likely to rise until the economy improves. Capital One 360 doesn't hate you. Ally Bank isn't trying to rip you off. We're just not in a high-interest-rate environment right now. The government is keeping rates low because they don't want you to save — they want you to pump your money into the stock market or the general economy. Until things turn around, we won't be seeing the high interest rates that were around back in 2006. Continue reading...
This guest post from Aja is part of the "reader stories" feature here at Get Rich Slowly. Some reader stories contain general "how I did X" advice, and others are examples of how a GRS reader achieved financial success — or failure.
By now we've all heard about how the giant national banks (Bank of America, Chase, Citibank) are "too big to fail" and have to be rescued from their mistakes with our taxpayer money. Like most Americans, I watched the bailouts of 2008 and 2009 unfold in helpless disbelief...these big banks were taking money out of my tax dollars to spend on CEO bonuses and stock market gambles, and it felt like there was nothing I could do about it.
But I decided there was something I could do. I'd been a customer with Chase (previously Washington Mutual). After reading J.D.'s article on rewards checking accounts and realizing I was missing out, I closed my account with Chase and moved my checking and savings to a local credit union down the street. I have to say, it felt great.
The reader stories I've been featuring on Sunday for the past three months seem to be a resounding success. Instead of being the only one to read your triumphs and failures, the rest of the GRS community can share them, too. I have no plans to expand this feature beyond Sunday, but I'm making an exception today. This short post from Jess Rundell fits with April's "financial literacy" theme, and I think it's worth sharing.
Since you always stress the magical properties of compound interest on your blog, I wanted to tell you a story about how I have learned the value of compound interest for myself. Intellectually, I've been aware of compound interest, and the fact that I should begin to save for retirement as young as possible, but after today I know this to be true.
I'm 21 and a final-year undergraduate university student. Although I've never had a "proper" job, I've had a few part-time jobs, and for 6 months when I was working in a call centre last year, I joined the pension scheme, although most of my friends thought it was a bit weird. Continue reading...