February 22, 2011
By: Jim Oosterman, Vice President
You know instinctively that it pays to shop around for the best value. Yet when was the last time you comparison shopped your bank accounts? A periodic review of your financial accounts can go a long way in helping you get the most out of your personal finances. Whether selecting the right checking account, building savings or getting a loan, here are some tips for comparison shopping financial products.
If you are like most people, a checking account is the core of your banking relationship, and it’s probably the account you use most frequently. It pays to make sure you have the right one for your needs. Almost every bank structures and prices their checking accounts differently, and figuring out the pros and cons of the various offerings can be tricky. However, the savings that you will realize from choosing the right account can be significant.
The first things to consider when comparing checking accounts are the fees and charges that apply to each account. Be sure you know if the account has a monthly fee and how much it is. Also, does the bank waive the fee if you keep a certain balance in the account each month? Are there other fees attached to the account as well? For example, does the bank charge you for using another bank’s ATM, using your debit card or paying bills online? How much are those fees? Also, how much does the bank charge if you make a mistake and overdraw your account? Don’t forget to find out if the bank charges you for checks, and be sure to ask if other fees apply to the account as well. Remember, fees and charges can vary greatly from bank to bank. Getting all the information before you open an account can save you real money.
Another consideration when choosing a checking account is whether the account pays interest on your balance. Many times, an account that pays interest carries higher fees than one that does not. If you normally do not keep very much money in your checking account, the interest earned may not offset the higher fees. Also keep in mind that some interest-bearing checking accounts carry restrictions and conditions that may not fit the way you like to use your account.
Savings Accounts and Certificates of Deposit
If you don’t need frequent or instant access to your money, or have excess funds to invest, a savings account or certificate of deposit (CD) can be a great option to consider. Both earn interest, however, a CD usually requires you to invest your money for a certain length of time to avoid an early withdrawal penalty. A savings account on the other hand, allows you to make withdrawals and deposits. As with checking accounts, some banks charge fees on savings accounts with small balances.
The primary consideration for most people when opening a savings account or CD is the interest rate they will be earning on their money. Rates vary from bank to bank, and it pays to comparison shop before making a decision. It is also important to remember that some banks will reward you for opening multiple accounts with them. Therefore, you may benefit from opening your savings account and CD at the same bank where you have your checking account.
As with deposit accounts, loan rates, terms and associated charges vary greatly from bank to bank. Whether you are seeking a home mortgage, home equity loan or auto loan, careful comparison shopping is very important. Although getting a home equity or auto loan is a big transaction, applying for a home mortgage may be one of the most important financial decisions you ever make. Making the right choice can save you thousands over the life of the loan. Be sure you are dealing with a reputable lender, one who is willing to spend as much time with you as you need to understand all of your options, and one who will not let you enter into a loan contract that you can not afford.
If you are buying a home for the first time, be on the lookout for home buying and other seminars or information sessions that are of interest to you. Local financial institutions usually offer these seminars for free, with no obligation. Planning to attend an information session or simply making a point to contact the institution and get in touch with a representative who will talk with you about your specific situation can be invaluable. Mortgage rates change constantly. Even if you already have a home loan, keep an eye on what rates are doing in case there is an opportunity to refinance to a lower rate.
Once you have chosen the account and the bank you want to do business with, your job is not complete. That’s because banks change their account features and prices periodically. When they do, they must give you a minimum of 30 days advance notice before a change goes into effect. It pays to stay alert for these notices, and to read them carefully to see how the changes may impact you. If you find that the changes make your account unattractive or too expensive, it is time to begin the comparison shopping process once again.
Where to Start
Bank websites contain a great deal of information about their deposit accounts, loan products and rates, and are great places to begin your comparison shopping. However, they do not always tell the complete story. If you still have questions, get in touch with the bank. Any banker who truly values your business will gladly take the time to answer all of your questions.
The more you comparison shop and understand the differences between financial products at various banks, the better chance you will have of making the right choice for your needs and lifestyle. That can save you a lot of money and aggravation in the future.