Assess your bank
In the current economy it is more important than ever to keep watch over your savings, mortgage loans, personal loans, CDs, money market accounts and IRAs. It’s imperative to make sure your bank is doing its best to help build security with your investments. More than ever consumers have to be proactive about finding ways to protect their money. Here are some tips to look for when assessing your bank’s service.
Make sure your bank is FDIC insured. If a bank is insured by the Federal Deposit Insurance Corp that means that your money is guaranteed up to $250,000 per customer. Even if your bank is currently in the midst of stress-testing, the FDIC insurance policy still stands. If you have any questions about whether or not your bank has the coverage, call 877-275-3342 to make sure.
The FDIC insurance applies to saving accounts, checking accounts, money-market accounts, CDs and IRAs. Although the elevated coverage to $250,000 was set to revert back to the previous $100,000 cap, Congress just passed a bill to extend the added coverage until 2013. In addition, credit union deposits are protected by the National Credit Union Share Insurance Fund.
Currently the average money-market interest rate is 0.4%. One way to optimize your interest rate is to do an online search for higher-paying rates. For example, Ally Bank in Utah is offering 2.20% for a 6-month CD or 2.8% for a 12-month commitment. Banking specialist Harry Gruber stated, “It’s takes some research to find better interest rates, but it’s not impossible. A search of the internet can lead you to a variety of out-of-state options where you can invest your savings and maximize your ROI.”
Another thing to look at when assessing your bank’s effectiveness is to look at their lending standards. Are you a candidate for personal loans if you need one? How easy would it be for you to get a mortgage loan? What about a new car loan? Find out what the lending requirements are for your current institution. Because of the economy, most banks are only lending to customers with a credit score of 730 and up. If you’re score is not in the 700s, now is a great time to start working on it. Get a copy of your free credit report from the three reporting agencies. For a clear picture, visit Smartmoney.com and use their calculators to see how a credit score can alter various payments, both monthly and overall.
Banks that are faltering need to raise cash any way they can and fees are a great tactic they use. Check with your bank to find out how expansive their ATM network is. Limited ATMs mean more fees for you to pay, both from your bank and the bank you use for your transaction. You could switch to a bank with better ATM saturation or join a credit union that has a surcharge-free ATM system. There are also some online banks, such as UFBDirect.com, that will reimburse you up to $4.50 a month for ATM fees.
It’s no longer a secret that banks generate an estimated $17.5 billion dollars annually from overdraft fees. One way to minimize this is to link your checking account to your savings account. If you checking account is too low for a charge, it automatically defaults to your savings account. There will be a transfer fee, but it normally is much lower than a $25 overdraft fee.
Credit card rates
Finally, check to see if your bank has raised your credit card interest rate, lowered your limits or canceled your cards. If any terms have changed on your credit card, call customer service and ask to have your previous agreement reinstated.
If your bank lowered limits on your credit cards that means you have to pay down your balance as soon as possible. You want to avoid damage to your credit score due to a higher debt ratio. Normally it’s acceptable to have 50% of your limit or less charged, without damaging your credit. Slashed limits can put you well below this limit, so be sure to check and alter your charges accordingly.
In the end it’s up to consumers to protect their finances. Whatever bank has your savings, check up on its policies to make sure that it is still serving your needs, post-recession. Watch for FDIC insurance, interest rates, lending for mortgage loans and personal loans, the fees your bank charges and what credit card rates they have. These five topics can tell you whether or not you should stay with your current bank, or find a new one.