When to bail on your bank

When to bail on your bank

Some relationships are complicated. Your relationship with your checking account should not be one of them. Your goal here isn’t to make huge gains with your money. Really, you just want three things from this arrangement:

To keep your money safe. At a bank, look for the “FDIC” sticker; at a credit union, look for the “NCUA” sign. These logos indicate that your deposits will be protected up to $250,000 by the government, in case your bank ever fails.

To provide a means to get cash. Are there ATMs close to where you work and live? Otherwise you’ll likely pay a fee every time you withdraw money from another bank’s ATM.

To give you a way to pay your bills. You want to pay low or no fees for the privilege of writing and cashing checks, so go with the least expensive checking account. Some accounts will charge you a fee if your balance dips below a certain number—avoid these kinds of minimums.

If you already have this arrangement with your bank, then great! If not, maybe it’s time to see what else is out there. Check out findabetterbank.com, or to find a credit union near you start here: findacreditunion.com.

Some people will advise you to seek out the best interest rates so you can grow your money, but that’s not a good use of your time. Frankly, I’m exhausted just thinking about this process. It involves researching interest rates, signing up for a new bank, a handful of calls to transfer your money, and remembering to track a new account.

Mathematically, it may sound worthwhile—but it’s not. Say you have $5,000 and you move it to from a bank paying you 0.3% interest to a bank with 0.5% interest. (These are actual rates today, based on findings at the always informative website bankrate.com.) By moving your money to the account paying 0.5%, you’ll make $50 in five years. Or to put it this way: an additional $10 a year. That’s not nothing, but it seems like a big hassle that could be achieved by, say, bringing your lunch to work for one day each year.

A better use of your time would be to consider the fees you’re paying on your 401(k). Say you’re 30 years old and you have $10,000 to invest. If you put that money in a fund charging you annual expenses of 1.27% (the industry-wide average), you’ll wind up with about $97,730 at age 65. But if you put that money in an index fund charging you 0.18% over the long term, such as Vanguard’s S&P 500 index fund, you’ll wind up with about $139,469 at age 65. Just a few percentage points can mean a difference of $40,000 down the road. Now that’s a rate worth chasing.

What do you love (or hate) about your bank?

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