Any Thoughts On Banks Vs Credit Unions Vs Internet Banks Vs....
Morning fellow YNAB’ers,
Trying to weigh the pros and cons of switching banks or the way that I do banking and since there is such a wide variety of experience and ideas here I thought that I would run by the crowd and see what your wisdom was.
Currently I have a traditional brink and mortar bank, I think that they have branches in 46 of the 50 states. Pretty good customer service, they are someone that I have had in the past several times in the past 25 years or so. However, I currently don’t have a checkbook, and I think the last check that I wrote was in 2013. No car, home or person loans and I closed the attached saving account because it seemed I would put money into it each month and then by the end of the month I would pull it out to cover things. I have opened an Acorns accounts, with round ups I am putting away almost double what I was putting into the savings account and I have not tapped it yet.
My options as I see it are as follows:
A credit union. My first checking/saving account was in a credit union, the advantages of living in rural Kansas. I have belonged to several over the years and overall enjoyed the experience. The downside I have found is finding one that I can join, currently in a state of flux between a couple of states so not sure I would meet the residency for the ones around here, I know I don’t meet the employer or religious requirements, this is from memory I would have to research the changes since I last checked.
An internet-based bank. I do most everything online anyway, but I do like having the option of going into a branch for strange amounts of money that I can’t get from the ATM, my car cash that I have to replenish tomorrow is a good example, if I travel an need foreign currency I know a brick and mortar would get me a better rate that the airport in a foreign country.
Prepaid debit cards, there are a couple of fee free cards I have used before, same advantages and disadvantages of an internet-based bank, with the added one of finding ATM fees if you use the wrong network and large fees if you use the card at the register and take cash back on some cards.
The thing that got me thinking on this is I am on SSDI, my benefit check date is officially the 3rd, yet when I had other banks and the prepaid cards, I would get the deposit 2-3 days earlier. I have friends with the same benefit date and different banks that get their benefits 2-3 days early. My bank says that they are not allowed to release early, yet letters from SSA and employers and other banks, state that you “may” receive the funds early, it depends when they are released by the payee. So I am getting 2 different stories, more I feel that I am being lied to, when my experiences and what I am observing around me are totally different. Thing is if my bank had decided to say something like, “As a matter of policy we are not going to release funds until the pay date.” I would have been fine with that.
Exchange rates at my local brick and mortar bank are usually really bad, and they also tack on a static exchange fee. Same with airport ATMs - they are notoriously expensive but less so than my local bank. I only withdraw enough at the destination airport ATM to get from the airport to my destination, then I use an ATM on arrival there. ATM withdrawals abroad are free with all my cards by now, because of competition. Domestically though, there are fees if I don't use the local bank's ATM network. Not that I use ATMs or cash much at all unless I'm abroad.
Your local bank may have favorable exchange rates to mine. I sure hope so. 🙂
Banks and credit unions basically do the same things from my perspective: They provide savings and checking accounts. The checking account is a place to receive and disburse funds. The savings account has (under US regulations) a limited number of withdrawals per months, and usually pays higher interest than the checking account. Most provide some sort of internet service. There may be variations in what the user interface looks like, but just about any institution worth considering will be able to do what I need to do online.
That leaves me with two issues to consider in choosing a bank or credit union:
1. What interest rate do they pay on the kind of deposits I will have? How customer-friendly is their interest rate policy, i.e. will they be slow to lower rates when rates fall generally and prompt to raise rates when rates rise generally? Are their historical rate levels competitive?
2. Are they local, and do I need to do anything that requires a local presence?
Point #1 is pretty self explanatory. I have a checking account that pays 0.65% APY. That's not a great rate, but it's better than checking account rates in a lot of places. I have a savings account that just got increased to 1.45% APY as of February 1. I am happy with my credit union as far as point #1.
Point #2 is more individually customized, and may change over time. For a long time, I had a local credit union (that didn't pay as much interest) because I might need to deposit an occasional paper check or cash. Then the world changed, and it became common for financial institutions to let me deposit checks with a smart phone app. Need cash? I can get it from an ATM if I'm desperate (rare) or I can use my debit card at a grocery store and get cash back. I don't use a whole lot of cash, so getting cash out isn't a problem. Having excess cash can be, as I have no good way to deposit it; so I tend not to withdraw cash regularly, only when I'm running low and might like to have some available for the odd gift collection or such.
I don't like prepaid debit cards. There can be terms, conditions, and potential fees to watch that will vary from one card to the next; my time is better spent on other things, so I have a debit card associated with my checking account that functions as I expect it to, i.e. no fees and I earn some chump change interest on unspent funds.
It is my understanding that SSDI is essentially the same payment system as Social Security. When I go to the SSA web site and look for scheduling, the 3rd is stated to be for benefits prior to May 1997; I assume this means that benefits commenced before May 1997. Mine didn't, so I'm looking at the 3rd Wednesday of each month. They arrive on schedule. I have never heard of any form of a Social Security payment arriving early, but I've seen a lot of US Government documentation of this, that, and the other that says something "may" happen that is so rare that I'm not sure it ever does. For the communications from employers, I'd guess they're quoting language from SSA without any understanding of what really happens.
Can't help you with exchange rates. I haven't traveled to Canada in years, and have no interest in any other foreign travel.
I am a big fan of credit unions (and should be, since I work at one!) and one thing I know is that they are easier than ever to join. Almost every one will have a workaround to become a member if you do not qualify through demographics or employment, usually by joining an affiliated organization. For example, with my CU you can become a member of something called CISA (Community Involved in Sustaining Agriculture) for $35.00 and that will qualify you to join the CU as well.
I had a bank that was available and flexible for online access anywhere -- even international, which was great... but that was when I was in the military & constantly going overseas. (Their interest rates sucked.) Now that I've set roots and have cash on hand, I need the ability to deposit cash and without a brick-and-mortar bank, it kind of sucked.
I now bank with a state-wide credit union that offers 1.5% interest on my checking account if I deposit at least 1K and keep it there for a few days during a statement period. Plus they (like many credit unions) let you do transactions through other credit unions, so it was much more accessible for me when it came to depositing cash.
On top of that, I have long-term savings through an online-only bank that also offers a decent interest rate, and that makes it a little harder for me to spend the money since it's not as accessible but at least it's earning more $$. In an emergency, I can do a funds transfer online from one to the other -- so I don't feel too "cut off" from my own money. :)