Are you considering a change in your banking situation? Closing accounts or switching banks can be daunting, but exploring alternatives might be worthwhile. Yanely Espinal, Director of Educational Outreach at Next Gen Personal Finance and author of Mind Your Money, offers insights into different types of institutions for your checking and savings accounts.
Major Banks
According to Espinal, major banks such as Chase or Citibank offer easy access to your funds. You can use your debit card at ATMs almost anywhere. These banks provide a wide range of accounts and services including online banking, loans, and credit cards. Monthly maintenance fees typically range from $4 to $25, unless you maintain a minimum balance. Espinal highlights that fees are generally lower at credit unions. Fortunately, some major banks are eliminating these fees and waiving ATM charges.
Most major banks are insured by the Federal Deposit Insurance Corporation (FDIC), with up to $250,000 guaranteed per customer per account. Despite this protection, issues such as Bank of America’s legal troubles over account fees have emerged. The federal government has fined other large banks, like Wells Fargo and U.S. Bank, for similar practices.
Credit Unions
Credit unions differ from major banks in their approach, focusing on member interests rather than profits. Espinal notes that because credit unions are member-owned, they tend to offer lower fees and higher savings rates. Membership might depend on geographical location or employment, such as military personnel accessing the Navy Federal Credit Union. Similar to FDIC insurance, credit unions have National Credit Union Administration (NCUA) insurance to protect accounts up to $250,000 per customer.
Credit unions provide fee-free ATM networks within certain areas but might incur fees out-of-network, similar to major banks. Despite fewer ATMs compared to major banks, credit unions offer excellent member-focused services.
Community Banks
Community banks strike a balance between the services of major banks and the personalized experience of credit unions. Espinal describes them as offering products akin to major banks but with attentive customer service. However, they might lack some conveniences like mobile deposit options.
Fintech Banking
Fintech banks, or mobile-only banks, target users dissatisfied with traditional banking fees. They offer enhanced mobile banking experiences and often boast fewer fees than major banks and sometimes credit unions. However, their newness brings risks concerning capital maintenance and growth.
Espinal cautions that fintech banks might not provide FDIC insurance directly from the federal government, although partnerships with insured banks can offer such coverage. Reviewing the terms and conditions before committing is crucial.
Diversification
It’s possible to diversify your banking by using multiple institutions. Espinal herself utilizes a high-yield account with an online-only bank for savings, alongside a major bank for checking. She emphasizes the active role you play in managing your money at any institution, likening it to lending rather than passive saving.
Banking decisions shouldn’t be passive. They should actively reflect your financial goals.
Editor’s note: Citibank and Bank of America financially support NPR. The audio portion of this episode was hosted and reported by Marielle Segarra, produced by Margaret Cirino, and edited by Meghan Keane. We welcome feedback at [email protected]. Tune into Life Kit on Apple Podcasts and Spotify or subscribe to our newsletter.