Is your bank account working for you?
It’s a good time to look for banks that provide services you need while helping you avoid fees and reach financial goals.
This could be challenging because of changes in the banking industry. As banks continue to adjust bank account terms to respond to new banking regulations, now is a perfect time to investigate your options and ensure you don’t wind up paying more for the same services.
Here are five questions you should ask your banker today.
How high should my balance be?
In the wake of new financial regulations, Greg McBride, CFA, Bankrate’s senior financial analyst, recommends looking out for more than just fee increases.
“Be sure to take note of any changes to your account structure, in particular higher minimum balance requirements,” McBride says.
Your bank may raise your balance requirement under the radar. “Whether it’s email or snail mail, pay very close attention to any correspondence you receive from your financial institution,” McBride says.
If your bank raises the minimum balance on your existing bank account, McBride suggests comparing other account options at the bank to find one that fits your spending and saving habits.
Meeting a minimum balance requirement helps account holders at Wells Fargo avoid monthly fees, but Wells Fargo spokeswoman Richele Messick says there are other options to help dodge a monthly fee, including making direct deposits.
“For many customers, direct deposit is very easy, and they take advantage of that option to waive the monthly service fee,” Messick says.
Still, if your bank’s restrictions are too challenging, you can look elsewhere. “There are plenty of local banks, credit unions and online banks that continue to offer free checking with no strings attached,” McBride says.
Am I earning interest?
While some big banks are no longer paying any interest on standard checking accounts, Bankrate’s 2011 High-Yield Checking Survey highlights options that can help you earn as much as 4 percent interest on balances as high as $25,000.
To compare earnings potential between your existing checking account and a high-yield account, use Bankrate’s interest rate comparison calculator.
McBride says rewards checking programs provide free checking and interest potential that outpace the majority of risk-free alternatives. However, McBride warns that account holders have to be able to satisfy account activity hurdles such as regular debit card use, online bill payment and monthly direct deposits.
“For consumers who use their debit cards on a regular basis and can consistently meet the requirements, high-yield checking accounts are the place where they can have their cake and eat it, too,” McBride says.
Can I still earn rewards points?
If you’ve grown accustomed to earning cash back or accruing rewards points for debit card spending, 2012 may hold some bad news for you.
“The traditional rewards program model funded by the financial institution is coming under significant pressure due to the reduction in debit swipe fees,” McBride says.
Merchants pay swipe fees to banks for processing debit transactions, but financial legislation has slashed those fees, reducing this big revenue stream for banks.
Still, the 2011 Bankrate Debit Rewards Survey shows some banks are still offering standard debit rewards programs. However, annual fees are beginning to pop up throughout the banking industry, which can easily offset any accrued rewards points.
Earning points for your everyday spending is becoming more challenging, but McBride says account holders will begin to see more merchant-funded rewards programs with specific retail offers targeted to consumers. While these programs do offer points and cash-back incentives, only certain purchases will actually reward cardholders.
What mobile tools are you offering?
Your mobile device may hold the key to more effective money management.
“Mobile banking has convenience features that go beyond computer-based online banking,” says Tom Berquist, senior vice president of Seattle-based BECU.
From transferring funds between bank accounts to finding the closest ATM, mobile banking includes a number of features that simplify money management for account holders, Berquist says.
Consumer awareness of the possibilities of mobile banking is still low, and Berquist says BECU is working to educate its members about new mobile tools and offerings.
“Financial institutions are continually testing and adding new mobile services that make banking easier for consumers,” he says. “If you are unfamiliar with these new tools, ask your financial institution or look for information about mobile banking on its website.”
McBride agrees mobile banking innovations can help bank account holders more effectively manage their money.
“For consumers that have a tough time maintaining a balance or have a tough time avoiding overdrafts, it’s a good idea to sign up for email or text alerts,” McBride says.
How healthy is my bank?
You may continually evaluate your own financial well-being, but it’s also good to research your bank’s health.
Bankrate’s Safe & Sound rating system uses more than 20 tests to evaluate the capital adequacy, asset quality, profitability and liquidity of financial institutions. Even if your knowledge of these subjects is limited, Bankrate’s star ratings provide an overall rating of how each bank is performing.
You will never know of a bank failure in advance, but you can take additional steps to understand your bank’s stability.
Greg Hernandez, spokesman for the Federal Deposit Insurance Corp., says the agency publishes data about all insured institutions online where bank account holders can review information about performance and capitalization.
While no account holder wants to deal with the inconvenience of a bank failure, Hernandez reminds banking customers all insured depositors are covered up to the $250,000 deposit insurance limit.
“Since the inception of the FDIC, no one has lost a penny of insured deposits,” Hernandez says.