Before selecting a bank, be sure to have a good understanding of your own banking habits, and what you need from your bank. If you know what you will need from a bank, it will be much easier to evaluate and compare between various offers. Here are some issues to take into account when examining and comparing bank services and fees:
Just because a bank is around the corner from home or work does not necessarily mean that the bank is the best one for you. You should consider whether or not you are willing to pay higher fees for better location, or if lower fees may be worth a little extra effort.
"Relationship Banking" vs. Shopping Around
Some banks encourage their customers to hold all of their bank accounts, as well as credit cards, mortgages, etc., with the same bank. The catch phrase for this is "relationship banking." An advantage of relationship banking is that your bank may let you add together all your account balances to reach the free checking minimum or offer other special deals. However, if your bank does not offer incentives for relationship banking, you may want to consider holding separate accounts at more than one bank to get the best deal.
Automatic Teller Machines (ATMs) are currently the most popular way of gaining access to one’s accounts, but at many banks they are also connected to a lot of fees. Using your own bank’s ATM is often free, but your bank may charge you an average of $1.00 to $1.50 each time you use another bank’s ATM. Then you may also have to pay an additional $1.00 to $1.50 to the bank where you do not have an account for the use of its ATM. You should know your own pattern of ATM usage, and compare that to the fees being charged by the bank for the use of its own ATM by its accountholders and for the use another bank’s ATM. If you normally use an ATM multiple times a month, an account that charges high ATM fees is probably not a good choice.
Minimum Balances & Maintenance
Many banks require balances of $1500 or more in order to get free checking or savings accounts. Consider the costs of the fees saved, and compare them to the amount of interest you might earn on that same $1500 if placed in a savings account or a CD. The monthly maintenance fees charged by banks on checking and savings accounts are generally not charged to customers who keep a certain balance, usually over $1500.
There are two ways that banks can calculate the fees they charge to customers who fall beneath this minimum balance. The more common way is to charge a fee if the average daily balance over one month is lower than the minimum. This means that if the minimum balance is $1500, and for a couple of days of the month you have $1400 in the account, you will still not be charged the fee. The less common method is to charge the monthly fee if the balance in the account falls below the minimum for even one day. This means that if the minimum balance is $1500, and for one day of the month your balance was $1499, you will be charged the entire monthly fee.
All banks in New York State that offer personal banking services must also offer "lifeline" Basic Banking Accounts. These low cost accounts must offer the following:
Check out the rules relating to these Basic Banking Accounts at the banks you are considering. Each bank can impose its own rules relating to direct deposit and other fees for bank services. Consumers may have to close all other bank accounts in order to be eligible to open Basic Banking Accounts.
Interest Bearing Checking Accounts
Think about the costs and benefits of interest bearing checking accounts versus savings accounts or CDs. Consumers can usually earn more interest in a savings account or CD, rather than an interest bearing checking account. If you routinely keep enough money in your checking account to meet the minimum balance and avoid paying fees, then gaining interest on that money is an additional bonus. However, if you are unable to meet the minimum balance requirements, an interest bearing checking account may have higher monthly maintenance fees than a checking account that does not earn interest.
Many banks have special accounts, for children, students and senior citizens, and special savings plans, such as "Christmas clubs" or vacation plans. These special accounts normally do not carry any fees.
Fees for Special Services
Banks are starting to charge for more services. Many banks now no longer return canceled checks to a customer, but rather microfilm them, destroy the originals, and charge customers a $3 or $5 fee in order to get a copy of a particular check. Again, there is a lot of variation between banks, so think carefully about how often you are likely to need such services.
Overdraft protection is a service that more and more banks are offering. Be sure to carefully review the terms of the agreement before you sign. Many banks are actually offering short term loans as overdraft protection, which requires a credit check and charge interest on the money loaned to you by the bank to cover what would otherwise be a bounced check. This may be combined with an add-on fee for the use of the overdraft protection. This service may offer substantial savings over bounced check fees and can be convenient.
Banks are now trying to encourage both individuals and businesses to use direct deposit services. Through direct deposit, your paycheck or government issued check is deposited directly into your bank account. No paper check is issued, and your entire check is available as cash on your regular payday. Some banks are offering reduced or waived monthly maintenance fees, free ATM usage and other incentives to sign up for direct deposit.
Another special service that banks offer is selling checks. Many banks offer a certain amount of free checks as an incentive to open an account, and then ask that you purchase checks through them afterwards. Checks are often cheaper when purchased directly from a check printer.
Charges Per Transaction
Along with the monthly maintenance fees that many banks charge, some also charge fees per transaction, such as writing a check, moving money from one account to the other, checking balances at your an ATM, or withdrawing money through an ATM. These fees usually amount to $1.00 or less per transaction (if you use your bank’s ATM), but if you perform many transactions per month, the costs can be significant. Evaluate how many checks you write in a month, or how often you need to check your balance at an ATM machine, and be sure to take that into account when choosing banks.
Many banks offer online banking services through which all banking transactions can be done from a personal computer with Internet access. Ask whether your bank charges a monthly access fee for these services. You might also want to inquire about a trial period during which you can use online banking services free of charge. If you decide to use online banking services to pay your bills, your bank may charge a monthly fee for this service ranging from $4.50 to $6.00 on average, although some banks do offer these services for free.
If you are interested in using an unfamiliar online bank, check the Web site’s "About Us" page to see whether the bank has physical offices in the United States. Be sure that deposits with the online bank would be covered by insurance through the Federal Deposit Insurance Corporation (FDIC); look for the familiar FDIC logo or the words "Member FDIC" of "FDIC Insured" on the site. If you choose to use a bank chartered overseas, the FDIC may not insure your deposits.
Some traditional banks may use a different name for the online presence of their bank, for insurance purposes. If this is the case, be aware that your deposits at the parent bank would be added to any separate deposits at the online version of the same bank, and the total would be insured by the FDIC only for the maximum allowed for a single bank.
Be sure that transactions through online bank’s Web site will be secure. In the address window of your browser, check to see that the first part of the online bank’s Web address changes from "http://" to "https://;" and also check the lower corner of the Web page to see whether a lock or key symbol appears, signifying security.
When using online banking services to pay your bills, remember to keep records of your transactions. Check to see whether the online bank offers customer support services, such as a toll-free number or email address, in case you need help resolving any problems that may come up. For further information on the track record of an online bank, contact the resources listed at the end of this report, including your Better Business Bureau.
Complicating the issue of choosing a bank is the high number of bank mergers, which can change a bank’s policies and fee structure overnight. More often than not, if your bank is involved in a merger, the merged institution will keep the higher of the two banks’ fees. If this occurs, take the opportunity to check out other banks to comparison shop.
Conclusion and Resources
The most important thing to realize is that you, as a consumer, has the right to change banks at any time, for any reason. If your fees increase or your branch closes, you have the right to make a switch at any time, for any reason. Exercise your rights to insure you get the best deal!
For more background information on the banks included in this survey, or other banks and savings and loans in the area:
Comptroller of the Currency
1114 Avenue of the Americas, Suite 3900
New York, NY 10036
This agency handles complaints and inquiries about national banks, and will investigate all written complaints that imply or reflect a violation of a Federal banking statute.
New York State Department of Banking
2 Rector Street
New York, NY 10006
212-618-6445 (For complaints or inquiries on state chartered banks)
800-842-6929 (For complaints or inquiries on savings and loans and savings banks)