Time to Compare Banks and Bank Rates

During a period of economic belt tightening it is time to take a closer look at bank rates, bank services and bank products.  Banks will market aggressively with high interest rates and teaser products to catch the consumer as a new bank customer.  The right bank products can yield higher rates of return or generate savings with lower fees for the bank customer, but the banking industry will remain relentless in generating income and keeping their costs contained. 

The income for the bank may take the form of higher fees, or catching customers sleeping when the interest rate on a high rate CD matures and rolls over into a lower than market rate CD or a bank attaching ancillary services and products that consume your financial resources without a corresponding financial benefit.  Banks need to make money but the consumers objective is to keep as much money in their pocket as possible and capitalize on the higher rates while steering clear of unnecessary fees.

Remember, banks want your money.  In a competitive deposit gathering environment, like the one banks are in now, banks are not above offering high interest rate CDs and money market accounts that are merely teaser products.  As soon as the bank meets its goal of deposit growth or customer acquisitions, the interest rates on these products fall back to the national average or in some cases below the averages.  The banking industry wants your money at the lowest possible cost to them so most unusually high rate offers do not last.  This can be used to the consumer’s advantage.  An environment like this calls for comparative shopping on more frequent basis.  This month’s best CD rate offer may very well be next month’s dog of an offer. 

In addition to comparing interest rates at banks, it is important to allocate the money deposited in bank accounts to those accounts offering the highest rates.  Banks pay very little interest on most of their products.  There are over 500 million checking and savings accounts held in U.S. banks.  Many of these accounts pay no interest at all.  Bank money market accounts can pay very attractive interest rates.  These accounts limit the number of transactions per month, but this doesn’t mean the transaction can’t be a transfer into a checking account.  It would certainly behoove most bank customers to transfer their money to a high yield money market account and transfer money as they need it back into a checking account top pay regularly occurring bills.  By keeping the majority of the funds in higher yielding account the only cost is the effort to make the transfers.
 
Evaluating costs is unquestionably not a category to be ignored when trying to maximize savings.  Banks have been on a fee generation tear for several years now.  Don’t take this for granted.  Always assess the interest rate a bank pays on the range of accounts being utilized or offered versus the fees it charges for those accounts.  Some banks discourage small depositors by levying fees on accounts below a certain size or by charging for withdrawals over a certain number within a specified length of time.  Even when a customer is not in the category of small balance account holders they can find banks increasing fees for services that used to free.  Being attentive to existing bank statements and the monthly fees assessed or comparing fee disclosure between banks in one sure fire way to avoid continuing savings depletion by bank fees.  More importantly, bank customer should evaluate the service they need and allocate their funds to the different accounts and/or different banks that provide the best rates in these accounts with the lowest costs.  Using multiple accounts and sometime multiple banks can have added benefits without added costs.

Comparing services and conveniences of a bank should not be overlooked while chasing higher rates. Taking inventory of the services needed compared to the services a bank offers can save time and money.  Some customers may have greater needs for services such as safe deposit boxes, ATMs, direct deposit, overdraft protection, bank by phone or online bill paying.  Exploring the features and cost of these services is a necessity to obtain the greatest overall benefits.  Because so much banking is done at ATMs, it’s important to know the costs of ATM transactions and the depth of the ATM network.  Comparing the services offered by the bank or the local bank branch can be a time saver and save on fees and should be viewed carefully before choosing a bank to handle your finances.

This entry was posted on Friday, November 14th, 2008 at 11:52 am and is filed under Money Rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.