I just joined a financial committee at my church. At a recent meeting, we reviewed account balances, and I saw to my dismay that two of our Certificate of Deposit (CD) rates were 0.15%. These were multi-year CD’s generating 0.15% annually. To give you an idea, the interest earned on 0.15% of $1,000 is $1.50. At this rate, we’d be better off hiding the money in a safe in the pastor’s office because at least then it would be easily accessible. This is an example of being too comfortable with your bank. Interest rates and savings policies change over the years, and it’s always a good idea to check in at least once a year and see if there are better options out there.
Personally, I currently do business with two banks and a credit union. My main bank is Discover. I used to bank with Capital One, but when I found out on my statement that they charged me a fee for inactivity, I quickly moved my money out of there. They didn’t give me a courtesy email or letter of the new charges. I think there are different rules now because it’s mandatory for a bank to notify their account holders of any changes in fees. But regardless, here’s the main reason why you shouldn’t be too comfortable with your bank.
Like that bully in elementary school, banks want your lunch money. Banks typically have incentives to get you to move too – like free checking, free online bill pay and $200 just for creating an account. Banks want your business because they know that if you ever need a loan, they will be more than happy to provide you one. Providing loans to customers is the primary source of income for banks. The more account holders they have, then the potential for more loans they give out – which means more money for them.
My advice – let the banks fight for YOUR business and don’t settle! If you’re looking for a savings account, shop around for the best savings rate out there. Discover isn’t the best (rate) anymore, but I’m still happy with the 0.95% rate. Not to mention my cashback checking. The best savings rate right now is Synchrony Bank at 1.05%. To me, that extra 0.1% difference isn’t worth the effort to switch. But if my savings rate was 0.15%, then YES it would be. Know what the bank charges your credit card, know their products, fees, and minimum balance requirements. Don’t get comfortable and don’t settle.
If you would like to know more, I’ve written a few articles on budgeting and money management. Follow me on facebook and twitter. If there’s a topic or question you want to ask, let me know in the comments!