banks

Capital One 360: A Competitive Banking Option

Miranda Marquit — Tue, 09 Mar 2021 08:35:15 +0000

It's been a few years since Capital One bought ING DIRECT, the popular bank that conducted most of its operations online. (See also: 7 Banks Still Offering Free Interest-Bearing Checking Accounts)

For most people looking to centralize their banking and find competitive rates, Capital One 360 is a viable option. Capital One 360 makes it easy to access all of your accounts, including your investment accounts, from your account summary.

Features and Benefits of Capital One 360

Capital One 360 offers a variety of banking products and services.

360 Savings

This is the classic account that started it all. There are no fees, no minimum deposit requirements, and no catches. Right now, the yield is .40% APY, which is reasonably competitive, especially when you consider that there are no minimums and no fees. It’s easy to link your account to other banks and set up automatic transfers to make saving easy.

Kids Savings Account

My son’s savings account at Capital One 360 kicks the crap out of the 0.20% he was getting at the local credit union. It’s easy to monitor the account from your own dashboard and to teach your child the value of saving early on.

360 Checking

You can open a checking account with Capital One 360 and earn a yield on the balance. Current yield is .10%. Account holders can use over 70,000 Capital One or Allpoint ATMs at no cost.

This account has no fees and no minimums, and you can use P2P Payments to send money to family and friends for free.
Bill pay is free, even when you have paper checks sent.
You can use CheckMate to deposit checks remotely, and the account comes with overdraft protection.
If you overdraw your account, you won’t end up paying a fee. Instead, you are just charged an interest fee on the overdraft until it’s paid off.

MONEY (Teen Checking)

MONEY is an account created specifically for the teen user. Teach your teen to manage her money with this no fee and no minimum account that earns interest.

CDs

The yields on the CDs from Capital One 360 are not as competitive as they could be, ranging from 0.20% to .40%. You can choose your term, and you can also choose when you want to receive your interest payments.

Business Account

Capital One 360 also offers business banking products. You can open a business savings account, or a business CD. The current yield on the business savings account is lower than what you get with personal savings, though.

You can also set up a retirement plan for your small business through Capital One. It’s fairly easy to set up, and you can offer this benefit to your employees.

Bottom Line

Overall, Capital One 360 is a viable competitor. The products offered remain fairly competitive. Additionally, the low-fee, low-hassle structure of the bank makes it easy to open accounts, and avoid watching your wealth erode due to hidden fees and complicated requirements.

This article is from Miranda Marquit of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Money Moves for the Newly Independent

Tim Lemke — Fri, 15 Dec 2017 10:00:06 +0000

You're done with college. You have a job. Your mom is hinting that she wants to turn your bedroom into a space for scrapbooking. It's time to set out on your own.

This is an exciting but scary time: You'll have a rent payment and other bills to pay now, and you need to start saving for the future. Now that you've fled the nest, there are some key money tasks that you should tackle. Do these, and you'll be well on your way to financial independence.

1. Start building that emergency fund

Young people living at home aren't too concerned with emergencies wiping out their savings. But once you are out on your own, you are more vulnerable to events that can throw you for a financial loop. Your car might break down and require thousands of dollars in repairs. You may have a medical emergency that's not entirely covered by insurance. You may even find yourself without a job but with bills to pay. This is why it's hugely important to begin putting money aside to cover unexpected events.

Start by working to accumulate three months' worth of living expenses, and then shoot for six. Don't invest this money; you need to be able to access it quickly if there's an emergency. Having this cash on hand could be the difference between continuing to live on your own and crawling back to the Parental Chateau. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

2. Shop around for bank interest rates

Before you went out on your own, you probably didn't think much about banks. You may have put your money in the same place as your parents, or the bank closest to your house. Now it's time to do a little homework to make sure your savings account is doing more than just holding your money.

Interest rates are still low these days, but you can bump up your passive income by shopping around for the best rate. If you are willing to have some money tied up for a while, consider putting some money into certificates of deposit, which offer higher rates.

3. Learn to budget

Being on your own means you have to actually pay attention to your income and spending. This is especially true for young people who may have student loans and aren't earning a lot (yet). It's imperative that you spend less than you earn, and this means paying close attention to your expenses.

You should begin by tracking your expenses each month so you have a good idea of where your money is going. Then, create small budgets for various key categories like groceries, gas, and rent. Your budgets for entertainment and frivolous expenses should be as small as possible. You may be free from Mom and Dad, but you aren't truly financially independent until you're avoiding debt and saving money at a good clip. (See also: Build Your First Budget in 5 Easy Steps)

4. Examine your credit card situation

You may have opened a credit card or two when in college, and perhaps you accumulated some debt. You never stressed about it when you were living at home, and Mom and Dad may have even helped you pay the bills. But now you are on your own, so it's time to get a handle on things. Take a look at how many credit cards you have and their interest rates. If you have piled up some debt, assess which cards carry the largest balances.

You don't necessarily want to close out cards, since that can hurt your credit score. But stop using ones with high interest rates and little other benefit. Come up with a plan to reduce your debt by tackling the highest interest cards first.

Moving forward, you'll want to get in the habit of using credit cards responsibly, avoiding debt, and hopefully earning some rewards along the way. Once you are in the habit of paying off your bill in full every month, examine which cards offer the best benefits, such as cash back or points you can redeem for merchandise retailers or air travel. (See also: Avoid These 6 Mistakes Newbies Make With Their First Credit Cards)

5. Make sure you are properly insured

It's common for young people to remain on their parents' health care plans, but at a certain point you need to get insurance of your own. You also need to obtain things like auto insurance, plus renter's or homeowners insurance. If you have a spouse or dependents, you should look into life insurance as well. This requires some research and discipline so you can find plans that are reasonably priced but also provide an appropriate level of coverage.

If you are employed, you may be able to get subsidized health insurance from your employer. (Be sure to pay attention to the open enrollment dates.) Those without insurance through their job can get it through the marketplace exchanges set up in accordance with the Affordable Care Act.

Choosing to go without health or auto insurance could subject you to penalties from the federal or state government. But more importantly, you place yourself at risk of financial disaster if a bad event takes place. Purchasing proper insurance plans is a key component of sound financial planning.

6. Take advantage of your employer's retirement plan

If you have a full-time job, there's a good chance your company will help you save for retirement by offering a 401(k) or similar plan. These plans allow you to place a portion of your salary into a wide range of mutual funds and other investments, and your employer may match a certain portion of those contributions. Plus, any money you contribute is deducted from your taxable income, so you save money. There is very little downside to opening an account right away, and you should do your best to at least get the full amount of the company match. The earlier you start, the more time your money has to grow.

7. Open a Roth IRA

Even if you take advantage of your employer's retirement plan, it's a good idea to open a separate individual retirement account that offers different tax advantages. With a Roth IRA, you can invest up to $5,500 annually in just about anything you want, and the gains on those investments can be withdrawn tax-free when you retire. A Roth IRA is available to anyone with earned income, so it's a great way to save for retirement if you are self-employed or don't get an employer-sponsored retirement plan. (See also: 5 Retirement Accounts You Don't Need a Ton of Money to Open)

8. Educate yourself about taxes

Guess what? Being financially independent also means you get to do your taxes! The IRS will always get a cut of your money, and it's important to understand how that will impact your take-home pay.

If you are employed full-time, you will likely have taxes taken out of your paycheck, but you need to adjust your withholding so that you're not stuck with a large tax bill or refund. If you are self-employed, you will need to plan to pay taxes on your income, and it may require you to pay taxes quarterly. Perhaps most importantly, you must learn all about the various tax deductions and credits that may be available to you.

If your taxes get too complicated, you can always pay someone to do them for you. But remember that there's a cost to going that route, and handing off your taxes to a professional doesn't mean you should remain ignorant as to what's going on. (See also: 8 Tax Return Mistakes Even Smart People Make)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Ways Your Credit Union Is Changing — for the Better

Janet Alvarez — Mon, 22 May 2017 22:06:53 +0000

Most of us understand the advantages offered by banking with credit unions, including better interest rates and customer service compared to their major bank peers. But even the savviest among us can learn new tricks, and to that end, CO-OP’s 2017 THINK Conference highlighted some of the critical ways in which the credit union industry is changing — for the better. We also caught up with financial experts like Jean Chatzky and Bobbi Rebell at the conference, where they shared some key insights into the types of transformations you might be seeing soon at your local credit union.

It's instituting mobile apps

You might’ve already noticed your local credit union instituting new technologies, such as mobile apps enabling remote deposits and mobile payments. This is part of an industrywide push to provide more customer-centric solutions utilizing the latest in mobile technologies. Expect more additions to mobile offerings in a bid to make your experience more efficient.

It's going digital to be more agile

Financial expert, author, and TV host Bobbi Rebell noted that, in addition to instituting mobile apps, credit unions are taking additional steps to create a digital-first platform for customers. But unlike big banks, which have a history of older, legacy customer platforms, credit unions are smaller and more agile, enabling them to build customer-focused digital experiences from the ground up.

“Digital transformation isn’t just about implementing digital experiences here and there,” says Rebell, “It’s really about rethinking the entire customer experience so that digital technologies improve their overall experience.”

It's promoting more women

Samantha Paxson, executive vice president and chief marketing officer of Co-Op Financial Services, notes that this lean, agile mentality not only enables credit unions to provide better customer service, but it also allows more women into leadership ranks.

“Credit unions are one of the few areas of the financial industry where women are represented in significant percentages in leadership. That’s because key elements of female leadership — such as empathy and strong communication skills — are essential to the success of credit unions in the community.”

It's staying true to your community

One of the personal finance world’s biggest luminaries, Jean Chatzky of Today Show fame, was on hand to help host the THINK Conference, noting the importance of credit unions to the lives of so many people in communities across the country. And perhaps that’s one of the biggest take-aways here: mobile apps, new digital platforms, and other innovations you can expect from your credit union are all designed to get closer to your needs. Credit unions aren’t losing their local focus, nor will their digital innovations present a less human experience for their customers. Unlike other segments of the financial industry, credit unions are trying hard to stay true to their roots: you.

This article is from Janet Alvarez of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Ways to Pick the Bank That's Right for You

Mikey Rox — Thu, 11 Dec 2014 14:00:11 +0000

With so many options, picking the right bank isn't always easy, leaving some people to pick a bank at random without giving much consideration to whether the institution meets their banking needs. (Personally, I chose Bank of America because of its abundance of locations across the country; I was tired of paying all those ATM fees from other banks while I was traveling). But while this a quick way to pick a bank, it doesn't guarantee the best banking experience. (See also: 9 Good Reasons to Choose a Credit Union Instead of a Bank)

1. How Do You Prefer to Bank?

Some people prefer going to an actual branch and speaking with a banker face-to-face, so they need a brick-and-mortar location. And if you travel a lot for either work or pleasure, you might need a big bank with locations in most of the country. When I first moved to New York City, I had to switch banks specifically for this reason. The bank I was with had very few branches in Manhattan, and I would have to take a 15-minute subway ride to deposit a $25 check.

On the other hand, if you're primarily banking within your community, and you prefer personable service and a hometown feel, a regional or community bank might provide a better banking experience.

Then again, maybe you can't remember the last time you stepped foot in a bank branch. Or perhaps you conduct most of your bank transactions electronically — thank goodness for mobile deposit, amiright? — so an online checking or savings might be right up your alley.

2. Check for FDIC Backing

Even a big bank can shut its doors. Remember 2008? No matter the type of bank you choose, you need to be confident that your money is safe. Therefore, only bank with institutions that are insured by the FDIC. Your funds are protected up to $250,000 per account, so you know your cash is safe if the bank goes under.

3. What Are the Hours and Locations?

Choose a bank with locations and hours that work with your banking schedule and location, since you probably don't have time to drive 10 or 15 minutes out the way to find a branch. Also, factor in a bank's lobby and drive-up teller hours. When are you most likely to visit branches? If you prefer visiting a branch before or after work, a bank that opens before 9 a.m. and remains open until 6 p.m. might be a better fit. Or if you conduct most of your transactions on the weekends, a bank that offers Saturday or Sunday hours may be a better option.

4. What Are the Fees and Interest Rates?

If you're switching banks because you're fed up with high fees and low rates, you need to be more selective this time around. Besides, if you're looking to grow your money and reach a financial goal, the last thing you need are fees eating away at your balance. Speak with a banker or visit the bank's website for information on fees and rates.

Is there a monthly maintenance fee for checking and savings account? If so, is there a way to avoid this maintenance fee? Does the bank offer free overdraft protection? What's the returned check fee? What type of rates can you anticipate for a checking or savings?

5. Does the Bank Offer a Variety of Investment Options?

Regular savings accounts don't earn much interest, but with a certificate of deposit, a money market account, or interest checking, you'll usually get more bang for your buck. Does the bank offer these products?

Some small banks only have one type of checking or regular savings, whereas other banks offer a variety of accounts to accommodate different customer needs. Some banks offer accounts specifically for students or senior citizens. You should thus consider your banking needs and determine whether your chosen bank offers adequate options. The goal is finding a bank with accounts that match your savings or checking needs.

6. Do You Need Other Financial Products?

You may prefer using your bank for all your financial needs. So, when choosing a bank, make sure you inquire about other products. If you're planning on getting a mortgage or auto loan in the near future, you might choose a bank that offers these products as well. As an existing account holder, you might be eligible for better rates on loans and credit cards.

7. What Services Are Important to You?

Make a list of must-have banking services. Big banks offer a massive selection of services, such as online banking, bill pay, wire transfers, and direct deposit. These institutions usually have the resources to provide the most innovative products. But if you're working with a community or a regional bank, services might be limited. Visit the bank's website to make sure the institution offers the services you use.

How did you choose your bank? Did any other these suggestions factor in? Let me know in the comments below.

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Good Reasons to Choose a Credit Union Instead of a Bank

Damian Davila — Wed, 16 Jul 2014 16:36:36 +0000

I am huge believer in credit unions.

When I first arrived to the U.S., I only had my savings and my dreams of completing a MBA degree. As an immigrant I didn't have a credit history or a U.S. bank account. This meant that many big names in banking were hesitant to give me a chance. This made qualifying for a credit card or becoming eligible for a car loan very challenging. Thanks to a local credit union, I was not only able to achieve these milestones, but also build my credit history and become financially independent. (See also: How to Switch Banks)

Here are the 10 good reasons to choose a credit union instead of a bank.

1. Credit Unions Have Owners

While banks have clients, credit unions have part owners or members. When you open an account, your account is actually a share and provides you voting rights. Instead of a board of directors, decisions are made by vote from shareholders. Each member has a voice in how operations are run, no matter how small her share may be.

On top of this, credit unions are not run for profit. Instead these institutions have the ultimate goal of providing their members better rates on loans and financial products. When a credit union makes a profit, it is used to provide better opportunities to the community that it serves.

2. Accounts Have Fewer and Lower Fees

When I was researching checking and savings accounts at banks, I was shocked at the fees they charged. Turns out that the average checking account from a bank has 30 different fees, such as maintenance and excess withdrawal fees. Some banks have up to 50 unique fees for checking accounts!

Unlike big banks, credit unions aim to minimize account fees. For example, credit unions are well known for not charging monthly maintenance fees, which are about $12 to $14 at big name banks.

3. Clerks Talk With You

This is a major advantage of working with a credit union. Credit unions have a much smaller client base, and they work very hard to keep them happy.

For example, on my first year I miscalculated an incoming paycheck and wrote a check that was $10 over my bank balance. Instead of charging me an overdraft fee, a rep from my credit union gave me a call and informed me of the situation. He asked me if I could make a deposit to cover the $10 difference by 11 a.m. Also, my credit union gave me a one-time overdraft fee waiver because they understood that it was a rookie mistake.

Every time that I need help I know that I can count on talking over the phone with an actual person that works at my credit union — no redirects to distant call centers. Some clerks even know me by name after so many years. This gives me the confidence of handling matters over the phone and knowing that any issue can be resolved.

4. Lower Financing Costs and Higher Payouts

Data from the National Credit Union Administration (NCUA) consistently shows that credit unions outperform banks. For example, in March 2014:

Credit unions had a national average rate of 4.75% for home equity loans, while banks had a 5.33% average rate
A $2,500 money market investment would have paid an average 0.16% at credit unions and an average 0.12% at banks
A $10,000 5-year CD yielded a national average 1.32% at credit unions and 1.14% at banks

5. Access to Financing for Low-Income Individuals

Credit unions do not only offer cheaper financing options, but also provide low-income or financially distressed individuals a chance to qualify for financing. Here are some examples:

Virginia State employees, who are paid on a monthly or semi-monthly basis and have held employment for over 12 years, are eligible for loans in $100 increments through the Virginia Credit Union.
Since 2001, the North Carolina State Employee's Credit Union has helped over 111,800 of its members to borrow $1.5 billion through $500 salary advance loans at a 12% rate payable within a month. The program enjoys a default rate of less than 0.1%.
During the 2009-2010 state employee furlough, the Hawaii State Federal Credit Union provided a special rate for those members affected by the furlough to borrow up to $5,000. The credit union continues to offer this assistance to members affected by federal budget cuts and furloughs.

6. Friendly Credit Card Terms

Credit unions are well-known for providing some of the most attractive credit cards. Some of the features include:

No annual fees.
No introductory rates.
Annual percentage rates start at 7.75%. (The national average for credit union issued credit cards is 11.56%, according to the NCUA.)
State Employee's Credit Union: 7.75%.
University of Hawaii Federal Credit Union: 8.50%.
The same APR applies to purchases, cash advances, and balance transfers.
Most credit union members enjoy the same APR, regardless of credit score.
No interest periods are often provided during the summer, December holidays, and special occasions.
Cash advances can be deposited directly into your checking account at no extra charge.

My very first credit card was through my credit union and I still keep it until this day. I have not been able to find a credit card that matches the great terms that my credit union offers. (See also: The PenFed Promise Visa Card Offers a Way to Escape Your Big Bank)

7. Car Loans

When it comes to providing car loans, credit unions have the local advantage over large banks.

As of March 2014, a new car 48-month loan stood at a national average of 2.69% at credit unions, and of 4.94% at banks. For used cars 48-month loans, the average rate was 2.87% for credit unions was 5.48% for banks.
They often run car loan pre-approval events, so that you have a pre-approval letter from your credit union before you visit a car dealership. Shop with confidence by being 100% sure about your financing.
Credit unions often partner with local dealerships for giveaways, such as gift cards for gas stations. For example, forms may be available at your credit union branch to take with you the next time you visit participating dealerships. You can receive free gas cards just for window shopping at a car dealership. The dealer fills out the form to confirm your visit and sends it back to the credit union. A couple days later a gas card is mailed to you.
If your credit union has a gas card partnership with a local dealership, it may also provide an even bigger gas card for financing a new car purchase through your credit union.
The more, the merrier: Some car dealerships may run "credit union days." At these events, you can browse financing offers from other credit unions, and, if you find a better one, inquire if you're eligible.

8. Private Lines of Credit for College Students

Most credit unions partner with Credit Union Student Choice to offer a private line of credit to supplement college education costs. The main advantages from these private student loans are:

Zero fees: no origination, application, or prepayment fees.
Lower interest rates than comparable private lines of credit.
Flexible repayment plans including school deferment.
Loans start at $1,000.

Almost 2,000 colleges across the U.S are eligible for loans from Credit Union Student Choice. To apply you must be enrolled at least part-time in a four year degree program at a participating public or private college.

9. Christmas Savings Accounts

Several people end up with a financial hangover from the Black Friday and Christmas "deals" because they rack up their store and credit cards. Shopping for gifts on plastic is a dangerous habit. (See also: Best Credit Cards for the Holidays)

While almost no banks run "Christmas Clubs" any more, nearly 72% of credit unions do. Christmas Clubs are special savings accounts that encourage saving for the holidays. The main objective of these accounts is to stash this money away from yourself and make the funds grow until the first days of the holiday season. By saving throughout the year with a Christmas Club, you have a higher chance of actually saving and decreasing your credit card use.

On top of that, most credit unions do something fun when they deliver your Christmas Club check. If you're having a hard time saving and love anything Christmas-related, then this may be the right savings vehicle for you!

What are other good reasons to choose a credit union instead of a bank?

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Things Your Teen Needs (or Doesn’t Need) in a Bank Account

Tisha Tolar — Wed, 18 Sep 2013 09:36:07 +0000

Teens taught to save from an early age may gain an advantage over kids with no parental direction concerning finances. How you handle your money matters will have a strong impact on your child's view of money and the values they hold into adulthood. While many people across the county are still struggling to put away cash from each paycheck they receive, teens that learn healthy financial habits will likely struggle less with their money management. (See also: Helping Your Teen Understand Money)

In addition to prioritizing savings, teens also should start learning the basic fundamentals of personal money management such as being responsible for balancing their checkbook and paying any financial responsibilities on time. As a teen's financial responsibilities increase, they will need to establish a savings account and a checking account. (See also: Top 5 Prepaid Debit Cards)

Here are 5 things every teen needs in a bank account.

1. Money, Money, and More Money

Opening a bank account with or for your teen isn't enough to teach a savings lesson. Parents would be wise to sit down with their child and talk about the benefits of savings and the best methods for hanging on to their cash.

Ideally, establishing a must-follow rule of savings, such as 10% of all money they earn or receive, will help a teen get into the habit of heading to the bank first rather than the mall. The savings account should never be touched for any purpose so it can be allowed to grow and earn interest for long-term financial stability. Checking accounts will need to have sufficient amounts of cash for checks written. (See also: Advice From a Financially Savvy Teen)

2. More Benefits Than Fees

Banks have been capitalizing on the many fees they are creating to keep making huge profits. When it comes to a new account for teens, it is best to shop around at different banks rather than just head to your preferred branch. Your teen should have a bank account that doesn’t charge a ton of excessive fees for administration or transactions. Be sure to review the associated fees with your teenager.

3. Avoid Flashy Incentives

There is still a lot of competition in the banking industry, so it is important for teens to understand what makes an account suitable for them. Banks often offer incentives that seem great on the surface but could leave the customer dissatisfied with the other account terms. Teach your teen to look past the free stuff and focus on the bank's conditions, fees, and limitations. They should find a bank that offers low-cost or free accounts that do not limit transactions including at the ATM and through checking accounts.Take time to read the fine print with your teenager and if you don't understand the terms, visit with the bank's manager for an explanation.

4. Accessible Banking

There is a good mix of brick and mortar banks and online banks offering great deals on bank accounts. However, some online banks or smaller institutions are not as accessible as a teen needs them to be. If they plan to use an ATM card for withdrawals or need to make cash deposits, they will need to be able to access a bank in person. Consider the accessibility of both the bank and its ATM locations when helping teens make a decision. If you anticipate in-person visits to the bank to cash or deposit checks, an online bank may not make as much sense as opting for a bank with a local branch.

5. Seek Out Banks With Educational Resources

Since your teen is just entering the world of personal finance, finding a bank that also offers free resources for financial education is a wise move. Many of the major banks offer online tools and guides for learning the basics of money. As parents can find it difficult to get lessons across to their kids, online tutorials can help close the gap in learning. Phone apps and other technologies offered by banks can be a very effective teaching tool for today's teens. (See also: Money Tools and Toys for Every Age Group)

Wells Fargo offers Teen Checking (SM) that include parents in alert messages and account management.
Bank of America offers a lot of free information on their Student Bank Accounts and Solutions page.
Chase also offers a High School Checking Accounts program for teens to help them manage their money.

Have you set up a savings or checking account for your teen (or younger child)? Has it been educational?

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This article is from Tisha Tolar of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Reasons to Love Your Bank

Elizabeth Lang — Mon, 27 May 2013 10:24:33 +0000

No one likes banks these days. The media is telling us that they are charging more fees and are to blame for the financial crisis. But the reality is that now is the time to love your bank more than ever.

Imagine that a security company guarded your house around the clock. If a burglar ever broke in and stole something valuable, like the family silver or your TV, your security company would replace them, no questions asked. You can come and go into your house as you please and even contact the company guarding your house around the clock — in person, by email, by phone. And sometimes, the company will even pay you for the privilege of guarding your house. (See also: Think Twice Before Ditching Your Current Bank)

This is similar to what a bank does for your money.

1. Your Bank Keeps Your Money Completely Safe

The nuts and bolts of banks, as the average consumer uses them, is that you give your money to your bank, and your bank protects it. The very best reason to use a bank is that you don't have to worry about your money getting lost or stolen. Keeping it under the mattress is not the best bet. In the unlikely event your bank fails, the government insures your deposits up to $250,000. If you like any other company that provides similar services (insurance, for instance), then you should like your bank.

2. Your Bank Provides Amazing Services

Besides just protecting your money, your bank also provides amazing services. Your bank gives you the ability to pay for something nearly anywhere you want by using a debit card. You don't have to carry around cash (and risk it getting lost or stolen). If you need or prefer cash, you can use an ATM to retrieve your money on nearly any street corner. And with ATMs you can even deposit checks, so you don't have to go to the hassle of waiting in line.

But let's say you want to talk with a real person about your money. You can go to a bank branch and get personal service. You can sit down with a banker and have them help you customize your accounts. Just today, I walked into a branch of my bank, and within two minutes a banker helped me close a business account that I no longer needed. He was extremely friendly and asked me if there was anything else he could do to help me. Previously a banker set me up with a permanent fee-waiver for my ATM card. That's great service.

Your bank likely allows you to transfer money online, get your account balance from anywhere, and track your spending and savings. Depending on the type of account you may even earn interest on the money you keep at your bank. And these are just the basic services your bank likely provides. Every day banks are rolling out more features — like banking apps — all for free.

3. You Can Often Get All of a Bank's Services for Free

All of the services I listed above? Many banks will give these services to you for free. Even if your account is listed as having a fee, walk into your bank and ask a banker if there is a way to waive it. Often, if you "bundle" services, your bank will waive the monthly charge. For example, see about opening a deposit account, setting up recurring transfers, or enabling direct deposit. Or maybe it's worth refinancing your home with a mortgage from your bank.

4. If You're Paying a Fee, You're Likely Getting Great Side Benefits

If you are paying a fee on your account, you are likely getting some additional benefits. Some fee checking accounts pay interest, provide free checks, or give you a cash rebate for the amount spent on your debit card. (If you're paying a fee and aren't getting any benefits, ask how to get a fee waiver or see point six below.)

5. Banks Are Subject to More and More Governmental Scrutiny

Every day, banks become subject to more and more governmental scrutiny. Some of these regulations may be warranted, but for the most part they are harming the community bank down your street. (That's the bank where not only will they be more likely to know your name, but you're most likely to get a loan if you want to start a business.) And these regulations are costing banks money to comply with. But banks are still passing very few of these costs onto the average consumer. And that's another great reason to love your bank.

6. You Can Change Banks

If you don't love your bank, you should switch. It's that simple. Every other bank wants you as a customer and you should make the most of that situation. If you don't feel that your bank is giving you the services and support you need, find another bank. Consider an online-only bank or the community bank down the street. There are thousands of banks. Think of the services you need, and find a bank that meets your criteria. If you were trusting the safety and security of your home to a company, you'd spend some time ensuring that it's the best fit for you. Do the same with your money and find a bank that you love.

What's great about your bank?

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This article is from Elizabeth Lang of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Credit Unions vs. Banks: What's the Difference?

Wed, 31 Aug 2011 09:48:19 +0000

If you don't belong to a credit union — or even if you do — you may not be aware of the many ways in which they differ from banks. Although banks and credit unions both provide similar services, each offers different types of benefits for account holders and borrowers. Let's take a look at the characteristics of a credit union versus a bank and learn how to determine which one is best for you. (See also: The Benefits and Drawbacks of Credit Unions)

Credit Unions 101

A credit union is a cooperative financial institution in which individuals pool their money to provide loans and services to other members. In the United States, credit unions are nonprofit entities, and their cooperative structure is designed to ensure fair dealing. Additionally, anyone who belongs to a credit union must first qualify to join under a particular institution's field of membership.

Why Join a CU?

Because the users and members of the cooperative are the same people, the idea behind credit unions is that they provide services that are tailored to the people who use them, rather than to driving profit for the institution. In addition, each member of a credit union, no matter how small his or her holdings, often has a voting share in the credit union's affairs. This ensures the organization's policies match up with what members really want. In practice, credit unions offer the same services as banks and are subject to federal regulations that are similar to those under which banks operate. However, because of the democratic organization of these institutions, they are often able to offer higher interest rates and lower fees than their corporate peers. Also, because credit unions are smaller — and often local — institutions, they may offer more personal customer service.

The Downsides to Credit Unions

That said, there are also drawbacks to banking with a credit union, which are largely related to these institutions' smaller size. This includes fewer branches and ATMs, as well as a lack of or lower-quality online banking options. In addition, although service at a credit union may be more personal, it will not be as robust as the 24-hour customer service many big banks provide.

The Big Banks

While it's important to compare rates and fees between banks and credit unions when you're looking to take out a loan or open a new account, what banks can provide over credit unions is more...of everything. Banks are often much larger than credit unions, which allows them to offer much more variety to account holders. Generally, a larger chain or national bank will have more loan and account options. Plus, virtually all major banks offer excellent online banking and investment options, and as mentioned previously, a very robust customer service department that can be reached at any time of the day.

Are Credit Unions or Banks Better?

If you're looking for a loan or want to buy a certificate of deposit, it definitely makes sense to shop around and include credit unions in your search. Whether you settle on a bank or a credit union depends on your needs and what you value. For those who are looking for a checking and savings account, a few money market investments and a simple loan or two, a credit union may suit them just fine. Those with more high-powered portfolios may require the horsepower a bigger bank can provide, like these high-yield savings and money market accounts from Capital One 360.

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Guest Post Blurb:

This is a guest post from NewYorkBankingRates.com, a site that compares interest rates from New York banks and credit unions to provide residents with the best financial products in the city.

This article is from of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

New Tools for the Unbanked

Philip Brewer — Wed, 15 Jun 2011 10:24:21 +0000

Until just the past few years, lack of access to the banking system has been an expensive burden on the poor. Just recently, a surge in new financial products make it a lot less expensive to be unbanked. (See also Making Direct Deposit Safe for the Garnished)

It used to be that you either used the banking system, or you paid through the nose to buy individual banking services (3% or more at a check cashing store, $1 or more for a money order, outlandish rates for a payday loan).

The Unbanked

Although the barrier to using the banking system is usually described in terms of poverty, merely having little or no money doesn't need to block access. It's really a cluster of related problems that add up to make using conventional banking services so difficult and expensive that people end up choosing to do without:

No cash to keep a minimum balance
No regular paycheck to have direct deposited to qualify for a no-fee account
Not living in a neighborhood with a local bank
Not speaking (or reading) English well enough to use banking services
Not having the skills to maintain a check register
Having a history of bounced checks or unpaid debts
Working during banking hours

Any two or three of those issues can put the regular banking system out of reach (although someone with a little financial savvy can almost always find a cheap way into the banking system).

But if the way you live your financial life makes the banking system a poor fit, there are now some alternative financial service providers that can be cheaper than regular banks.

The New Prepaid Cards

These alternatives are organized around a prepaid debit card. Instead of cashing a check, they put the money onto your card. This is just as good for you (you can get cash at an ATM) and cheaper for them.

These cards do charge fees — a lot of them. There's often a fee to get a card, a fee to add money, a fee to use an ATM, a fee to check your balance, a monthly fee, etc. But the fees are clear (rather than mysterious the way bank fees can seem to someone whose parents didn't teach them how to use a bank). And they're low — a careful user can keep the monthly charges at just a few dollars (less than they'd pay for a bank account).

Further, we're about to see another step down in these fees. That's because the new cap on debit card swipe fees has an exception for reloadable debit cards — provided the cards have no overdraft charges and allow at least one no-fee ATM withdrawal per month.

I still think the banking system is the better choice for most people. But for everyone else, the next generation of prepaid cards will provide most of the banking services they need, and do it with lower fees than ever before.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Benefits and Drawbacks of Credit Unions

Flexo — Thu, 10 Mar 2011 12:36:10 +0000

It's difficult not to be annoyed by traditional banks. Many financial institutions just don't have incentives to provide better and less expensive services. Although some have begun to adapt to changing needs and desires in the industry, most brick-and-mortar banks still don't feel threatened. Because banks aren't meeting the needs of some consumers, more people are turning to credit unions as an alternative. (See also: Beating Bank Fee Increases)

A good friend of mine, a business owner, shared with me his concern about his finances. Thanks to his success, he has cash that he wants to be available for his business's leaner times, and he was unsatisfied with the savings rates he could find — even with high-yield online savings accounts. We were able to find a credit union that not only offered better interest rates for savings, but allowed him to qualify for a business line of credit at a low interest rate.

These pricing benefits are just some of the advantages of working with a credit union. Any type of banking institution has benefits and drawbacks. Here are the issues that you need to consider before ditching your current national bank and joining a credit union.

Advantages of Credit Unions

Customers are owners.

The executive management of any company must answer to its owners. With a publicly-traded banking institution, shareholders care about only one thing: making money. In these companies, management often makes decisions that benefit the shareholder but inconvenience the customer. Shareholders might be happy when a bank decides to charge a new fee to increase revenue (and as a result, the stock price), but those who use the bank's services do not want additional fees.

With credit unions, the set of owners and the set of customers are one and the same. All decisions should benefit everyone.

Credit unions are non-profit.

Non-profit status means that more of the profits are shared with the owners/customers. That doesn't mean that the institutions can't earn a profit; any business needs to earn money to survive. The difference is that there isn't a pressure to find ways to make money off the customers. Additionally, credit unions benefit from exemption from federal tax, and that saved expense help more of the unions' revenue to be put to work.

There are fewer fees and higher savings rates.

As a result of the advantage listed so far, credit unions typically offer free accounts with no minimum balance requirements. Fees are generally absent from credit unions. Interest rates on savings, certificates of deposit, and some checking accounts often significantly exceed those offered by banks. In the same respect, interest charged for loans and credit are often lower. In fact, some credit unions are regulated such that the interest rate on loans and credit cards must not exceed a certain rate.

Disadvantages of Credit Unions

Access to new technology is limited.

There certainly are drawbacks to being a non-profit. Credit unions often do not have the funds to invest in technology. As a result, some credit unions' websites appear as if they belong in a bygone era. I've come across a few credit unions that still do not have a website that allows online account access. The level of technology varies greatly from one credit union to another, and some credit unions do have full-featured web-based technology, but it's worth auditioning a website before committing to a new credit union if accessibility is important to you.

They have fewer ATMs.

With a national bank, I know that I could travel anywhere in the country, and perhaps internationally, and find ATMs from my bank to avoid unnecessary fees. Credit unions are often community-based groups with no capital to install ATMs in convenient locations. Credit unions often get around this limitation by allowing you to use an existing network of ATMs, and if that ATM's owner charges you a fee for its use, the union will refund that fee on your statement. Be sure to read the fine print of your agreement to determine whether you will be able to find free ATMs near you.

Membership is restricted.

Credit unions are often focused on a certain community — most often either a geographic location or a profession. This has created the impression that it can be difficult to find a union for which you qualify. You might find that you're not eligible for the credit union that looks most appealing to you, but just about everyone can find a credit union to join. For example, Pentagon Federal Credit Union is generally only available to those who are U.S. government employees and a few other select groups, but anyone else can also qualify with a $15 donation to an organization.

Additional Information

Your deposits at credit unions are insured, just like your deposits at banks. The FDIC is the government organization that ensures that your bank balances are safe, even if the institution fails, up to a certain amount. Credit union balances are protected by the National Credit Union Association (NCUA), another government entity, for the same amounts. Always check to ensure your credit union is legitimate by verifying coverage through the NCUA website.

Like banks, credit unions often offer a full suite of financial products, such as credit cards, mortgages, debit cards, business loans, and checking accounts. Their non-profit status means that most do not have the funds available for major marketing and advertising campaigns, so it's difficult for the public to get the information needed to make an informed choice between banks and credit unions. It may require some research, but it is worth the potential savings and service.

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This article is from Flexo of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Are You and Your Banker a Perfect Match?

Kate Lister — Mon, 06 Dec 2010 14:18:24 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/are-you-and-your-banker-a...

Imagine logging on to BankHarmony.com in search of the perfect banker and stumbling on this profile:

The one thing I am passionate about is:
Helping small business owners grow their businesses.

The three things I’m most thankful for are:
Customers, customers, and customers.

My friends describe me as:
Generous, hard-working, flexible, creative, and a good listener.

Three of my best skills are:

Being able to convince my colleagues to sign off on a loan I believe in.
Working with business owners to solve their problems.
Always going the extra mile for my customers.

I spend my leisure time:
Talking to business owners and learning what it’s like to be them.

I can’t live without:
Customers.

The last book I enjoyed was:
Finding Money: The Small Business Guide to Financing by Kate Lister and Tom Harnish. It told the real story about how to find lenders and investors. (Disclosure: Kate is the author of this article.)

The traffic on this guy’s profile would probably melt down BankHarmony’s server.

Well, since BankHarmony doesn’t exist, how do you find a good banker? Does size matter? How do you know they’re not next on the list of government bailouts?

Finding Your Dream Banker

Accountants, attorneys, and other small-business professionals are a good source of advice. In fact, a referral from someone the bank knows and trusts may get you a little extra attention.

You might also want to:

Ask for referrals from local businesses — preferably those in similar industries so the lender will already understand your business.
Order Dun & Bradstreet reports on your competitors — their lender’s names are often included in the report.
Pay a virtual or actual visit to your local SBA office and pick up a list of the most active SBA lender in your area.

Does Size Matter?

Smaller regional banks often have the advantage of being light on their feet. Their loan approval process may be more streamlined than that of larger banks. In some cases, you’ll even get to know the senior people behind their decisions. But don’t expect their credit criteria to be lax — with smaller portfolios, they need to be extra careful about marginal deals and industry concentrations.

Before you decide on a small bank, ask whether they’re likely to be gobbled up by a larger bank any time soon. Mergers and acquisitions often mean changes in personnel, services, pricing, and risk tolerance. Also, ask whether the bank will be able to handle your credit and non-credit needs as you grow. Depending on their size, they could have trouble accommodating a multi-million dollar loan without bringing in other bank lenders.

Large banks typically run their small-business lending on the branch or regional level. This allows them to operate more like neighborhood banks, but some are less interested in the small end of the market than others, and personnel turnover can be greater as their lenders have more upward mobility. Keep your ear to the street for who the friendly ones are.

Are They Healthy?

While the worst of the banking system meltdown is hopefully behind us, it’s still a good idea to keep an eye on your bank’s financial strength. Even though your deposits may be insured, if a bank goes under comes under the scrutiny of the federal regulators, "it" does roll down hill.

While it isn’t BankHarmony.com, BankRate.com offers a Safe & Sound® rating system to help you avoid the real losers. Too bad the dating sites don’t have that.

This article is from Kate Lister of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

That Sneaky Bank Almost Got Me

Philip Brewer — Fri, 03 Dec 2010 13:00:06 +0000

It was as much luck as anything else, but I just managed to avoid $30 in bank charges. It's a good example of rule number one for avoiding bank fees: pay attention.

I'd actually gotten the document with the details I needed to know a month ago. I'd even looked at it. Unfortunately, I missed one little detail that was tucked away in a large-format, eight-page, full-color, glossy brochure filled almost completely with details I didn't need to know — all the fees for all the services my bank provides, along with all the kinds of accounts they offer and the rules for all those accounts.

In a little box on page three was a little change: The minimum balance for money market accounts was now going to be $2,500 instead of the $1,500 it used to be. Fall below the minimum balance for even one day, and you get hit with a $15 change for the month. We have two of those accounts.

As I say, having missed this change when I got the brochure, it was mainly luck that I noticed it this morning. I was logging into my bank's website to transfer some money and clicked a link for "changes taking effect today." Clicking that link downloaded a PDF of the same brochure I'd already looked at.

Since the transfers I was going to make this morning were to our money market accounts, I had money market accounts on my mind. So I took a minute to check the entry for money market accounts and noticed the change.

I spent several flustered minutes verifying that I could boost both accounts over $2,500 and still have enough cash to pay the bills that needed paying. I also transferred some money from elsewhere into our checking account, although it'll be a couple of days until it arrives.

As I said, it was as much luck as anything. I was lucky that I happened to log into our bank today, lucky that I noticed the link, lucky that I checked the entry on money market accounts, lucky that I noticed the change, and lucky that we had enough money on hand to cover the higher minimum.

But it was more than just luck. I run our finances with a certain amount of slack — I keep cash on hand specifically to handle situations like this. And, of course, I make a point of paying attention to that sort of thing, because paying attention is rule number one for avoiding bank fees.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

A Mortgage Crisis Solution

Philip Brewer — Tue, 12 Oct 2010 13:00:10 +0000

The latest twist in the ongoing saga of the mortgage crisis is that some fraction of the banks (and other owners of mortgages) didn't manage the paperwork well enough to be able to prove that they actually own each particular mortgage on each particular house. This is bad and sloppy — but it just might contain the seeds to a solution.

I've written before that the root cause of the whole financial crisis was not (as many have suggested) falling house prices; rather it was that housing prices got too high. If you think about it, the average house has to be affordable to the average household — who else is going to buy it? Once prices got too high, they had to fall. The government and many other institutions have done what they can to "fix" the problem of falling house prices, but that's an effort doomed to failure.

Although propping up housing prices is a losing effort, it's a popular one. Homeowners like it — and homeowners tend to be voters. Bankers also like it, and the government has been looking out for them as well, for several reasons: They're a source of political contributions; bank regulators are tasked with preserving the banks (which are endangered by collapsing housing prices); even legislators and regulators who are primarily looking out for the interests of ordinary people know that a collapsing financial sector would be hard on everyone — not just bankers.

The upshot has been that, despite the fact that a lot of people would like nothing better than to stick it to the banks, there's been very little effort to actually do so.

This latest twist in the crisis, though, may give us an opportunity to make the banks do the right thing.

The Right Thing

The right thing would be for the pain to fall where it belongs. A lot of failed mortgages have two culprits. It's as much the fault of the homeowner who bought a house they couldn't afford as it is the fault of the banker who lent them money they'd never be able to pay back. But I'm not too worried about sticking it to the poor homeowner — they're going to suffer plenty. My main concern is that helping them not cost the rest of us a lot more money.

So, to my mind, the right thing to have happen is for the banks who made stupid mortgages to be the ones who lose a lot of money. That's not a popular idea with bankers (who won't get nearly as much bonus money), and it's not a popular idea with bank regulators (who worry that banks that lose money might go under, dragging the rest of the financial system down with it). But the discovery of this record-keeping failure may have taken matters out of their hands.

Banks have been resisting efforts to write mortgages down to the value of the house, even when the only alternative is foreclosure. All those foreclosures are sad. They'd be sad even if the only people being foreclosed on were foolish people who bought houses they couldn't afford — I don't want to see even foolish people turned out of their home. But it's worse than that. Many innocent people are caught up in the housing catastrophe. (You can see the stories of some innocent victims in the comments on my post Six Options if You're Underwater on Your Mortgage.)

Up to now, though, there's been no pressure on banks to negotiate with homeowners to straighten things out. It's been cheaper to just foreclose, write off the loss, and go on.

But now that everyone knows that the banks had been cutting a lot of corners on the paperwork, the situation is very different. A few egregious mistakes aside, in most cases there really is a mortgage and the owner really hasn't been making his payments. But because of the mistakes, it now seems clear that the bankers will no longer be allowed to slide things through quick and easy. Instead, they're going to be forced to cross every t and dot every i.

This changes everything. In the cases where the record keeping has been very sloppy, it may be impossible to prove that the bank really owns the mortgage. Even where it's possible, it may be expensive. The banks, looking for the cheapest solution, just may find that it's cheaper to negotiate with the owner, and then write a new mortgage (and make darn sure that the paperwork for the new mortgage gets filed correctly). Even if they write the mortgage down to fair market value, they'll probably come out ahead of where they'd be if they had to foreclose, maintain the house for a while, and then sell it into a down housing market. (And they'll come out way ahead of where they'd be if the homeowner discovered that the bank can't prove that they've actually got a mortgage on the house at all.)

I see this as a win for everyone except the bankers. Homeowners get to stay in their house, with a new mortgage that reflects the actual value of the house. House prices fall to where they belong, making houses available to ordinary people — but they do so without the dislocations of so many foreclosures and forced sales. Bank profits will suffer, but in exchange the banks get a chance to clean up their paperwork — valid, provable mortgages that will stand up in court. Really, it's just the bankers — whose bonuses will be under considerable pressure until this is all worked through — who lose.

As a bonus: Going on the theory that there's considerable overlap between the banks most prone to screw up the paperwork and the banks most prone to lend money to people who couldn't pay it back — I'm thinking that the worst of the pain will tend to fall right where it's most deserved.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What is "Quantitative Easing" Anyway?

Xin Lu — Fri, 13 Aug 2010 14:00:08 +0000

Recently, the news is abuzz with the term "quantitative easing." What is it anyway and how does it affect you?

Quantitative easing is the act of central banks injecting the economy with cash in every conceivable way. In response to the financial collapse and the ensuing recession, central banks around the world used every tool at their disposal to increase the money supply. The US Federal Reserve has been extremely proactive in coming up with innovative solutions to increase the amount of capital available to banks, increase the money supply, and prevent deflation. These "creative" solutions fall under the umbrella term "quantitative easing," although the US Federal Reserve has attempted to distinguish its strategy by phrasing it as "credit easing."

Basically, quantitative easing is a monetary policy where central banks "print" money and introduce this newly created wealth into the money supply by purchasing securities on the open market. The banks from which these securities are purchased then have additional capital beyond their reserve requirements that they can loan, invest, or horde for themselves. Quantitative easing is usually employed when the federal funds rate is at or near 0% because there is no possible way to lower this rate.This results in the Federal Reserve expanding its balance sheet. In the past couple years, quantitative easing has often been in the news as the Federal Reserve agreed to buy billions of dollars worth of government bonds, mortgage bonds, and other securities.

The intended short-term result of quantitative easing is to increase the money supply and stimulate the economy. By purchasing government bonds on the open-market, the Federal Reserve can lower interest yields, which in turn lowers the interest on new debt, potentially encouraging companies and individuals to consume more credit and increase spending.

Conversely, quantitative easing lowers the deposit rate, or the rate banks pay depositors. A lower deposit rate reduces the benefits of holding savings, and encourages depositors to consume their deposits or seek other investments. The end result of quantitative easing is intended to benefit consumers. Decreased borrowing costs and an expanded money supply is supposed to increase demand and consumption. Once demand starts increasing, confidence should return to businesses and hiring will resume.

Modern economic theory argues that deflation is one of the worst possible economic outcomes and quantitative easing is supposed to prevent that. The idea being that if deflation takes hold and prices continue to fall, consumers will delay purchases, assuming that prices will be cheaper in the future. Delaying purchases decreases demand and leads the economy on a downward spiral. Furthermore, quantitative easing reduces the pressure on banks by increasing their available capital and increasing demand for loans.

The biggest risks associated with quantitative easing can occur when the folks in charge introduce too much cash with their policies and hyperinflation results. If there is a great increase in the money supply, then real goods, commodities, and services can drastically increase in price while savings and the value of the dollar are destroyed. Creditors will lose real return on their investments and the effect on the country's credit could be disastrous. These problems can be exacerbated by politicians who see government debt being purchased and use the opportunity to increase government spending without increasing taxes.

The bottom line is that quantitative easing can be a double-edged sword. In the case of Japan, quantitative easing did not work and deflation ensued for years. This could also happen in the United States. What do you think? Should central banks around the world continue their policy of quantitative easing to battle deflation and spur borrowing? Have you taken advantage of the lower interest rates?

This article is from Xin Lu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What Makes a Good Business Bank?

Thursday Bram — Thu, 06 May 2010 21:49:46 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/what-makes-a-good-busines...

The bank you choose for your business accounts can make a major difference in how well your company operates. Your bank can control everything from how easy it is for you to get a business loan to how soon your customers' payments will actually be available for you to spend. Convenience is a factor of course, but there are considerations that may be more important than if your bank is just around the corner from your office.

There are certain services that may be necessary for you do carry out your day-to-day business. International wire transfers, online banking, payment processing and other services can certainly narrow down which banks you may consider. But many banks do have similar offerings these days, making it more important to find a good bank that will not only handle all of your needs, but that will also provide great service and reward your loyalty.

That may mean leaving the bank that handles your personal accounts or even moving an account you've already established. Many banks have very different ways of handling personal and business accounts and even the convenience of doing all of your banking in one location isn't enough to make up for other issues. Factors like how well-connected the bank is locally and the quality of their customer service for business accounts can truly influence your ability to grow your business in the years to come.

The Local Connection

Rachael Solem is the owner of Irving House at Harvard and has been in business for nearly twenty years. About ten years ago, she was looking for a mortgage and considered larger commercial banks.

Our experience with banks as mortgage lenders has been that the larger banks do not care about or know about our business as much as the local banks do. After considerable research the last time we refinanced, we got the best deal from a local bank (Cambridge Trust), for both terms and interest rate. In addition, that same bank holds our operating accounts and does our merchant credit card processing. All has worked smoothly with them for years.

Solem has built a personal connection with her bank over the years. She knows the president, along with several vice presidents and commercial lenders. That connection makes it easier for her to do business.

The bank provided more flexibility with the terms of our current loan, and it is because my partners and I could be fairly candid with our lender about our goals for the business. They had to learn about our business — hospitality — which is a niche in the lending world because evaluating hotel properties is tricky. Now that they know us, I believe we can look to them as a lender to a buyer, if and when we decide to sell.

It doesn't hurt that local banks can be crucial components of your community, offering intangible benefits on top of help managing your money. Solem is co-chair of Cambridge Local First, a local business association. She says:

We are finding generally that local banks provide very competitive services and rates for many, many small businesses. In addition, they are very generous with sponsorships and donations to charity in our community.…Cambridge Trust has for at least 100 years provided the meeting space for the Harvard Square Business Association. It offers prime marketing space in its windows (in several branches, including the most popular Harvard Square office) to its depositors for no cost. The bank has for three years sponsored a fund raiser organized by Cambridge Local First, paying for the print materials necessary to promote the event so all proceeds can go to a local not-for-profit. When I first organized this fund raiser, it took a single, short phone call to the president of the bank to make this happen. Cambridge Trust is a regular, significant presence with community efforts everywhere I turn, from housing and food, to education, cultural endeavors, hospital wings. Google Cambridge Trust, they're everywhere in Cambridge good works.

Visit the Bank

While it may be tempting to research the banks you're interested in and then make a decision from there, it's important to actually go in and visit those financial institutions that you're considering. Even if you plan to do most of your banking online, it's important to get a feel for the location. David Yale, the owner of A Healthy Relationship Press, went to each of the banks he was considering opening accounts with. Yale says:

I visited several neighborhood banks unannounced. Most were impersonal, and one was totally disorganized and incompetent. As I waited to meet with a rep, I heard lots of customers complaining bitterly, and lots of reports about fraud. But at one bank, CapitolOne, I was greeted warmly, offered coffee or tea, introduced to the branch manager, and engaged in a conversation about what my business needed from the bank. All the other customer transactions I overheard during this discussion were positive. They were so clearly competent I decided to bank with them. It's been six months now, and I'm glad I made this choice.

Customer Loyalty

When you find the right bank, sticking with them can make your life easier. Bob Liggett has been handling the banking for his consulting and training business with US Bank since 2002. Not only does the bank reward his loyalty, but the customer service manager has more than wowed Liggett:

She knows me and my needs, and is always willing to take whatever time it takes to resolve my questions (and never makes me feel dumb!) …When Karen transferred to another branch location, I followed her there and drive the extra miles gladly.

That sort of connection can translate to better terms for loans, waived fees and other rewards for your willingness to stay with the bank. It can also mean that if something goes wrong, no matter whose fault it is, your bank is likely to take the steps necessary to get your account straightened out. Customer loyalty can be the key for a small business to get treated like a big company that may bring more business to the bank.

This article is from Thursday Bram of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: