How to Choose a Financial Institution
Thinking about changing financial institutions? First, you need to decide if you want to keep your hard-earned money with a bank or a credit union. Then, you should determine which financial institution has the products and services you need to achieve your goals.
Banks vs. Credit Unions
The biggest difference between a bank and a credit union is who it’s “owned” by. Banks are for-profit enterprises owned by a group of investors, otherwise known as shareholders. In order for the shareholders get a return on their investment, they often have higher fees and minimum balances required for accounts.
Credit unions are not-for-profit financial institutions owned by their members. You must meet a set of requirements and pay a (usually small) membership fee to become part of a credit union. In the interest of the people they are serving, credit union profits are reinvested to provide financial education, lower interest rates on loans, and higher dividends for savings accounts.
Once you have narrowed down your search between a bank or credit union, ask yourself the following questions.
1. Does the financial institution have products and services you need?
While most financial institutions offer the basics, checking and savings accounts, you may have specialized needs. If you have a business, you may want an institution that has a robust business services team to provide useful connections to help your business grow and be there to help you find the right financing.
If you are about to head off to college, you may want an institution that understands student loans inside and out so you don’t pay them forever after you get the degree. Or, if you are leaving your home to go to school, you may need a flexible checking account that waives ATM fees whenever/wherever you need to pull out cash.
If you want to buy a house in the future, look for one that offers great rates and can help through the process. If you want to build your savings, ensure they offer high dividends. Every financial institution has its niche to best serve you.
2. Are they convenient for you?
A financial institution can serve you in multiple ways. They can serve you online, in a branch, or over the phone, so you need to ask yourself: What’s convenient for me?
If you are on the go, you may look for a financial institution that has enhanced digital online tools, such as:
- Bill pay
- Open new accounts
- Transfer funds to different accounts – internally and externally
- Remote check deposit
You may prefer a face-to-face conversation. If that is the case, you need to look for local institutions in your area with excellent customer service. Usually, a credit union is comprised of locals who get to know you and are ready to help you reach your goals. To evaluate the best in your area, you may want to check online reviews.
3. What are their rates?
Before choosing a financial institution, you need to review their rates. You want the best of both worlds – lower rates for loans and higher rates for savings accounts. While these rates fluctuate, you should be able to see trends with each institution. Banks usually offer higher loan rates while credit unions offer higher rates for their savings accounts so you can earn dividends on your money.
Your money should work for you.
4. What perks do they offer?
How is your financial institution working for you? Some common perks to look for are:
- Account minimums – The less money it takes to open an account the better.
- Security features – Your money needs to be secure. Some financial institutions go above and beyond to recognize signs and keep your money safe from fraudsters.
- FDIC or NCUA – If something bad happens, you should have “insurance” on your money. Ensure your new financial institution is insured through the Federal Deposit Insurance Corporation or National Credit Union Association.
- 24/7 customer service – Questions occur outside of 9-5 bank hours. Instead of remembering it the next day, maybe you can get an answer in a few minutes.
You shouldn’t be on this journey alone. You deserve to have all the savings, spending, and borrowing opportunities. Choose a financial institution that keeps your interests and goals top of mind.