Franklin Ross wants you to get the right bank. On his site Know Your Bank, he guides people through finding the right bank and getting the most out of it. He spoke with us about how to find the financial institution that's right for you.
How important is it to know your bank?
It is important; you are entrusting your bank with your hard-earned money, and you should know who you're trusting and doing business with. Banks are not infallible, and some are better than others.
That being said, knowing your bank is not as straightforward as it sounds. There are two sides of knowing your bank: one is understanding your bank's fees, rates and services, and the other is understanding your bank's safety or, in other words, how your chosen bank's financial ratios measure up to the FDIC's regulatory standards.
What policies or concerns would make you consider switching banks?
I want to know if my bank is being upfront with me on fees and overdraft charges, or if they hide them in the small print. If they're not upfront with me on fees, then they may not be upfront with me about other things.
In terms of bank financials, what would give me pause about doing business with a certain bank is if that bank did not meet liquidity standards set by the FDIC. A specific ratio to be on the lookout for is your bank's Texas ratio, and if that Texas ratio is above 100%, that may be of concern.
What are some differences between credit unions and banks?
There are some clear differences; credit unions are not-for-profit organizations, which are owned by their members. Banks are for-profit institutions owned by their shareholders. Credit unions may offer higher savings rates or lower loan rates to their members as a result of their financial cooperative structure. At the same time, banks may offer more services to a consumer than a particular credit union, as well as have more scale. In the end, a consumer should shop around and see which bank or credit union will give them the right fit of service and price for their needs.
Should we use one bank for absolutely everything, or should we take it on a case-by-case basis?
I don't think you should ever put all of your eggs in one basket - and different banks will provide you with different services and products. So, I think you should take your bank choices on a case-by-case basis, and also be weary about using one bank for everything.
Are there financial products we shouldn't consider getting, and if so, why?
The first financial product I would tell anyone to beware of are payday loans, which can have interest rates upwards of 300%-500% on an annual basis.
In terms of particular products that are offered by your bank, I would be careful of any loan product that has an adjustable rate. Rates are extremely low today and adjustable rate products seem so cheap, but if the Fed raises rates, the cost of those products can change very fast, and what seemed inexpensive today can seem an overwhelming burden tomorrow.
What are some trends in banking that consumers should keep an eye on?
The rise and improvement of mobile banking and mobile payments are the major trends today. On the mobile banking side, banks are innovating with their online products, and many have developed their own mobile applications that allow you to easily interact with your bank. You can deposit checks, transfer money, check your balance, set goals and see payment info from your mobile device, computer or tablet. On the mobile payments side, companies are coming out with products that are making it easier and faster to send money, pay and get paid - some examples of products and companies that are on the cutting edge of the mobile payments space are Square and Venmo.