When it comes to choosing a financial institution to bank with, you have many different options:
One of the “big names” or one that’s less publicized?
Bank or credit union?
Local, regional, national, or international?
These are all important decisions to make, but are there other crucial factors you might have forgotten to consider? Here are the two most common mistakes we’ve seen people make when choosing a banking institution:
Mistake #1: Not Doing Your Research
This one wins as the biggest mistake by a landslide. It’s probably the most common mistake made because it is the most time-consuming, but believe us, it’s worth it!
Not doing your homework can cost you in stress and money. Take “Sally’s” situation, for example, Sally’s friend suggested she open an account with Bank X. Sally figured her friend’s experience was enough to base her decision off of, so she opened and checking and savings with Bank X. Sally deposit some money into her new checking account and the $4,000 she had saved up for a down payment on a car into her savings account. A few days later Sally checks her balances, but something was wrong… All of her money was gone!
Sally contacted Bank X to inquire about the “mistake” that must have been made with her accounts. Come to find out, over the years Bank X had acquired one of Sally’s previous lenders, Bank Y. Sally had an 8-year-old outstanding debt with Bank Y, not from her own mismanagement of money, but due to being the victim of identity theft. Even though repayment of this debt was legally not her responsibility to repay AND past the statute of limitations to be collected upon, Bank X kindly took all of Sally’s funds anyways to apply it to the debt and “interest and fees accrued”.
After trying to work with Bank X’s customer service representatives to no avail, Sally did some research on the bank. She found this type of illegal and predatory situation in common among clients of Bank X. Not only are victims speaking up, but there are actually several open lawsuits against Bank X for its unscrupulous practices.
Don’t make the same mistake Sally made; take the time to do the research FIRST. Some questions you should get answers to:
What do current and former customers have to say about them?
Are there any lawsuits against them? If so, what type? Why?
Does anything indicate that they may be predatory in nature?
Have they received any bad press? Sure, everyone makes mistakes, but if they have made some in the past, what have they done doing to correct them?
If you ever find yourself needing to dispute a “debt” someone is trying to collect on, you can use our free Universal Dispute Document. You should also do some research so you can understand your rights in the situation.
Mistake #2: Not Understanding the Costs & Benefits
We’re not just talking fees and terms associated with an account, although those are important, but also considering the long-term costs and benefits. Let’s break this point down into two categories you should take into account: short-term and long-term.
Initially, there are the short-term factors you need to take into account:
Is there a minimum balance you need to maintain?
Does the account have convenient features such as online banking, mobile deposits, or easily accessible bank and ATM locations?
What are the other fees you could encounter?
Insufficient funds fees (Overdraft)
Monthly service charges
If the financial institution you are considering rates positively for the above, you should still assess the long-term impact it could have on your future.
Do you plan to buy a house or car eventually?
If so, does this bank/credit union do mortgages our auto loans?
Are they serviced in-house or sold off to other companies?
How do their interest rates compare to others in the market?
Do you want to start building the positive credit history? What options do they have to help you down that path?
Secured credit cards, personal loans, credit build programs?
Are there investment opportunities and good rates if you wanted to plan for retirement or other future needs?
Do they have educational opportunities to help you learn more about your finances and become a skilled money manager?
These possible costs and benefits are often overlooked, but if you take time to evaluate them beforehand, you’ll be setting yourself up for success now and in the future.