How to Choose a Financial Institution

A lot of people think financial institutions are basically the same and it doesn’t matter which one you use. They may all seem the same but they have many different policies and procedures. They can also have different “nickel and dime” fees that you need to be aware of. Before comparing financial institutions, understand your financial needs and which are most important to you. Are you more concerned with deposit accounts or loans? Match your banking behavior with the fees and costs. Once you have completed your homework you are ready to compare. Here are some suggestions.

• Read the fee disclosure statement. This is the form that completely describes the fees charged. The financial institution is required to give it to you, and it will help you compare institutions.
• Understand ATM Fees. These fees can vary widely between different financial institutions and can add up quickly.
• Understand Checking Account Policies and Fees. Again, these can vary widely between financial institutions. For example, is it really free checking or do you have to pay additional fees for services you really need? Are the costs of an interest bearing account worth it or are you better off with just a regular checking account?
• Understand the connection between credit scores and loans. The first thing you need to know is your credit score. Today, many financial institutions “rank” their borrowers so that people with higher credit scores pay lower rates and those with lower scores pay higher rates.

If you can’t find a traditional bank you like, there are some excellent alternatives:

• Credit Unions. These are a great alternative if you can be a member. They usually are client friendly and have lower costs, but they may not have all the services offered by larger banks.
• Brokerage Firms. Brokerage firms offer money market accounts that are basically checking accounts. They usually pay great interest but are not as convenient and offer very limited loan products.
• Internet Banks. They have become a safe and easy alternative. If you haven’t checked them out, you should. Some pay great rates. A good web site for shopping and comparing banks is www.bankrate.com.

It can be a good strategy to use two or three financial institutions depending on your needs; daily transactions, loans, investments.