Beating Broke

Personal Finance from the Broke Perspective

Choosing Your Next Bank

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In the last five years or so, the banking industry has seen some major changes.  Interest rates have plummeted. We’ve had at least one recession, and a recovery of sorts.  The stock market has dropped like a rock and soared like an eagle.  We’ve also seen the rise of online banks become a new-fangled curiosity to something that most of us accept as a standard.

Online banks have made it normal to have services like bill-pay, electronic deposit, and easy to use online account management.  They’ve also put the pressure on traditional brick and mortar institutions to revamp their services, lower their fees, and offer more for their users.  But, they’ve also made it more difficult to decide on a bank.  No longer do we just pick the best one of a handful in our town, or the one that mom and dad used to use.  They’ve increased our selection, and made the decision a tad bit more difficult.  So, how do we go about selecting our next bank?

Bank Location

Choosing Your Next BankEven in our super digital world, where our physical locations are becoming less and less likely to matter, the location of your bank might make a difference to you.  You might like the ability to walk into a branch of your bank and make a deposit, or talk to someone face to face.  You might just like the security of knowing that you have that ability should you really need it.

When you’re choosing your next bank, you really need to decide if having a local branch available to you is something that is important, or if it’s just something that might be nice.  If it’s important, you’ll want to take most of the online banks off the list of eligible institutions right away.  If it just might be nice, you can leave them on the list.

Bank Fees

There’s been a lot of talk about bank fees, hidden fees, and transaction fees lately.  After the most recent housing market crash, and the new legislation on credit card transaction fees, many banks are trying to find new innovative ways of recouping the costs.  They’re getting creative with their fees, and their fee structures.  It should go without saying that you can have the best bank in the world, with all the shiny services, but if they’re adding on fees all over the place, they just aren’t that great.

When you’re choosing your next bank, take a close look at their fees and fees structure.  Does their checking/savings account have a monthly fee if you’re inactive?  Does it have other monthly fees for services?  Are the fees they have significantly higher than what other institutions charge?  Fees that you don’t, or won’t, end up being charged might not seem all that important, but they can be an indicator of the future of the institutions fee structure.  Be sure to make note of, or cross off entirely, any bank that has a difficult to understand fee schedule, or higher than average fees.

Bank Services

Here’s where you can usually weed the really bad ones out.  Maybe they have all the right locations, a huge ATM network, and better than average fees.  All of that will be somewhat useless if they don’t have all the services that you want.  Find out what services they offer.

When choosing your next bank, be sure to check to make sure what services they offer.  Make a list of services that you must have.  Bill-Pay would be top of that list for me.  If it’s an online bank, having some way of depositing checks electronically through an app on your phone might be high up on the list.  Does their debit card offer cash back?  Do they offer any rewards?  What other perks does the account have?  What perks would you like it to have?  The truly analytically minded out there, like me, might just choose to use a spreadsheet to tick off what each candidate has, and use it to compare.

There are plenty of choices out there.  Decide on what it is that you want in a bank, and then go about finding one that offers it all.  Chances are that you’ll find it.  For me, I’m still using the Capital One 360 (used to be ING Direct) account I opened up years ago.  I like that it’s easy to use, super simple to create sub accounts for categorization, and has very few fees.  I’m also a fan of Ally bank, but their login process seems to lock me out about every third or fourth time I try and login.  That’s not very convenient for me. 🙁  But, their rates are usually up there with the highest and their customer service is top notch.  If you’re better at remembering your password than I am, they’re a good option as well.  I’ve also heard good things about Perkstreet (2% cash back debit), and USAA, but haven’t used either to verify.

Here are some banks offering some great rates for online savings (rates are accurate as of 9/23/2013):

  • Capital One 360 — 0.75% APY — Apply Now
  • AMEX — 0.85% APY — Apply Now
  • Ally — 0.84% APY — Apply Now

I know there are plenty of other options that others rave about all the time. What is your favorite bank?  What qualifications do you look for in a bank?

This post was first published in June 2013, but is being republished today, with updates (Perkstreet is closing, and rates updates)

 

Are You Prodigal?

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I have to admit a bit of ignorance here folks.  For years, I associated the word Prodigal with the word Prodigious.  They have the exact same root structure, only different suffixes.  Prodig -al -ious.  Whoops.  The story of the Prodigal Son should have tipped me off, but never did.  It wasn’t until I was reading the opening chapter of Popes and Bankers (that I received for review) that I realized my mistake.  Here’s the definition of Prodigal as it is shown at dictionary.com:

–adjective
1.wastefully or recklessly extravagant: prodigal expenditure.
2.giving or yielding profusely; lavish (usually fol. by of or with): prodigal of smiles; prodigal with money.
3.lavishly abundant; profuse: nature’s prodigal resources.

–noun
4.a person who spends, or has spent, his or her money or substance with wasteful extravagance; spendthrift.

You can be prodigal, or you can be a prodigal.  To me, there are several words that jump out from that definition.  Wastefully.  Extravagant. Lavish.  With the exception of wastefully, the others are words that we’ve been conditioned to think of as good.  We want our things extravagant and lavish.  It’s a sign of money, right?

And yet, day after day, we read and write articles on sites just like this one about the other end of the spectrum.  Frugality, Savings, and even Cheap are words that are valued.  Even so, I think that each of us could find an example or two in our lives where we are prodigal.  A pretty strong argument could be made that cable TV is a prodigal expenditure.  A third car.  Eating Out.  Leaving your computer on.  If we keep going, we could create a very long list!

What’s my point, you may be asking?  My point is that, despite all our practicing of frugal lifestyles and saving money, we might still find ways in which we are prodigal.  Rather than beating ourselves up over it, however, I would suggest that we use those things as motivation to eliminate them.  Or to offset them as a whole.  Maybe you’ve chosen to keep cable TV.  Find a way to reduce spending in another area to make up for that monthly charge.  The single expenditure may remain prodigal, but your overall spending does not.

Which brings me to a further point.  We often beat ourselves (and each other) up over spending too much here or there.  We miss the forest for the trees.  Being prodigal in one area does not make you prodigal overall.  And let’s not forget that being miserly or cheap can be just as poorly looked upon.

Added: It looks like I’m not the only one thinking about these things today.  Check out The Balance between splurger and miser at Get Rich Slowly.

Note: This post was originally posted on March 18th, 2010.  It was somewhat popular then, and is worthy of a second look, so I’m re-posting it today.

Are You a Financial Pessimist?

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A few weeks ago, I shared that we’re all financial optimists, and it’s hurting our bottom line.  Like many, I’m guilty of thinking that my experience is common of most people.  Because I’m a financial optimist, I assume many people are, too.

How Financial Optimism Affects Our Finances

We’re digging our way out of some serious debt, and part of why we have that debt is because of financial optimism.

Four years ago, we took out student loan debt so my husband could finish his Ph.D.  We knew once he finished the long haul of finishing the degree and then completing a two to three year post-doc that finally he would begin to make a good salary.  That’s still true today, but we’re slowly trudging that long path.  Two more years until the post doc is over.

What we didn’t anticipate in our financial optimism is how long the road would be and how painful these years of low income and high student loan payments would be.

But I digress.

Financial Pessimism Isn’t Much Better

Clearly I shouldn’t have stated “we’re ALL” financial optimists because the comments on the post made me start thinking about the flip side–financial pessimism, which is nearly as bad as financial optimism.  Financial optimists make their decisions based on a bright future that may or may not come.  (That’s how we justified taking out $30,000 in student loans.)

Financial pessimists often make their decisions based on fear and assumptions of what might go wrong in the future.  Though this seems like a much better place to be than a financial optimist because the pessimist is protecting what they already have, it’s not really.  Pessimism can stagnate your growth.

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My friend’s dad (I’ll call him Tom) inherited $100,000 when his uncle died.  (His uncle had never married and didn’t have children of his own.)   Tom had never seen that much money at once, and the idea of putting it in the stock market scared him.  He was afraid he would lose it.  Instead, he promptly put it all in a 10 year CD and earned a measly amount of interest.  Plus, that money was locked up for years!

His fear and pessimism cost him money.  Yes, he kept the money safe, but it was unavailable for 10 years, and he only made enough to cover the cost of inflation.  He didn’t let the money work for him and grow because he was driven by fear.

Financial pessimism can also cause you career stagnation.  Elizabeth has been at her job for 20 years now.  She finds the job exhausting; over the last few years, more and more people were cut from the staff, but those positions were never filled.  Elizabeth is now doing the work of several people; she often doesn’t get to go home early enough to see her young children before they go to bed.  She wants a change, but she’s afraid that she won’t find a job that pays as well or has such good benefits.  Her fear leaves her stuck in a position she doesn’t like, working too many hours, counting down to retirement that is another two decades away.

Financial optimism can hurt your bottom line by giving you confidence to spend money you assume you’ll make in the future.  Financial pessimism can hurt you because you’re often fueled by fear which can cause stagnation and limit your financial growth.

What do you think is the best strategy to remedy financial optimism or pessimism?