Are you tired of paying fees for basic banking services to one of the mega-banks that dominate the American financial scene? With a little effort, you can keep more of your money.
The 2008 financial crisis led to some action in Washington that affected banking and borrowing customers -- the creation of the Consumer Financial Protection Bureau, and the passage of some regulations requiring proper disclosure and longer notice of changes. But the most significant result of the debate leading to these reforms was to scare the pants off the big banks. In advance of any new restrictions, they moved to protect their profits by creating new fees and hiking others.
However, plenty of alternatives to the "Big 10" banks offer comparable services for significantly fewer and lower fees. You may not know about them because they lack the marketing and advertising resources of the biggest competitors. That means they're hungrier for your business and will give you a deal to get it.
It's Easy to Comparison Shop
Here's a quick way to check your options: Click on Bank Rate Monitor for the rates and fees charged by banks in your area for a range of financial products, from checking accounts to mortgages.
If you live in Atlanta, for example, interest checking will cost $30 a month at Wells Fargo (WFC) or zero dollars at FNBO Direct or Charles Schwab Bank (SCHW). Three other local banks offer interest checking at about half the cost of the big national banks listed.
You also could pay $2.95 for getting cash at an out-of-network ATM -- or pay no surcharge -- depending on which bank you choose. The interest rate on a home equity loan could be as low as 3.75 percent, from the Pentagon Federal Credit Union, or as high as 6.68 percent, from Bank of America (BAC). Your interest rate on a one-year CD can be as high as 1.10 percent or as low as 0.1 percent.
The raw numbers aren't the only factor to consider. Look at JDPower's latest rankings of consumer satisfaction in their banks, broken down by region. It's based on responses from 80,000 customers, who rated services, fees and products.
Despite years of consolidation, with the big banks growing ever bigger, you'll find a wide variety of choices. These include:
Credit unions. A credit union is a financial services cooperative owned by its customers. Fees tend to be significantly lower, because it's a not-for-profit that exists only to serve its depositors, each of whom is a shareholder. Historically, membership in a credit union is open to people with a common interest -- members of a union, employees of a company or worshippers at the same place. But many are open to an entire community. The National Credit Union Administration research tool can help find a credit union that is open to you, and a locator shows its branches.
Regional banks. As its name suggests, a regional bank offers its services in one state or region. Lacking the enormous customer base and marketing budgets of the big banks, they have to work harder to keep customers and attract new ones. The JDPower.com rankings are a good place to start your search.
Community banks. Like a regional bank, only smaller. A community bank earns its profits and its reputation on local services and investments. By definition, it is independently operated and has assets under $1 billion. The Independent Community Bankers of America locator can identify community banks near you. You might be surprised at the choices. A search for Philadelphia turns up 20 choices with branches in Center City.
Virtual banks. A virtual bank has no physical presence anywhere. If you never go inside a bank and prefer to use a banking app, direct deposit and electronic bill payment, this could be your low-cost option. By eliminating brick-and-mortar branches, most virtual bank can offer free checking and no ATM fees. As always, you need to read the fine print. A virtual bank has to make real profits. Check to see if they're making up the difference by charging high fees on debit cards or other services that you user regularly. MyBankTracker.com lists online banks.
The 7 Biggest Financial Mistakes 40-Somethings Make
Plot Your Escape From the Big Fees of Big Banks
If you've been making mortgage payments for a while now, it may have become just another task you do automatically each month. But it's time to start thinking about your end game. When will your house officially be paid in full, and how will that date intersect with your other plans? Do you need to adjust anything to make your "mortgage freedom" date align with the rest of your life? For example: Do you want to have your house paid off by the time your kids leave for college? If so, start scrutinizing the timing, so you can figure out if you need to make extra payments.
The average student graduating in 2014 emerged with $29,000 in student loan debt. There's no predicting what that number will be once your children are ready to don a cap and gown. But you don't want your kids to be saddled with tens of thousands in debt as they begin their adult lives (or potentially live in your basement well into their 30s because of that debt).
While your children should absolutely apply for every scholarship they can, you can't count on them getting what they'll need. So. there's no time like the present to start seriously building up their college funds. If you're not quite sure about the best ways for you to do that (529 plans are great, but they're not the only good choise), a fee-only financial adviser can walk you through your options.
Are you putting aside enough for retirement? Aim to replace 70 percent to 85 percent of your current income, or save 25 times your current annual expenses. Once you have that final number in mind, use an online retirement calculator or sit down with a financial adviser to come up with a plan for how much you'll need to save each year to reach it. If you haven't already done this, don't delay another day. Future You will thank you.
Credit card debt is a shackle that can prevent you from reaching every other monetary goal on your list. One of the first things you need to do to get your financial house in order is to eliminate all consumer debt -- the sooner, the better. Otherwise, you're losing money each month that could be put to better use elsewhere.
Make debt payoff a top priority. Try an aggressive method like the "debt snowball," where you throw every extra dime you can at your smallest balance until you've decimated that bill. Then move to the next one on the list and continue amassing "victories" until you're done with every debt. Where can you find the money to accelerate your debt payoff? Reduce your expenses or take a temporary second job, if necessary. The sooner you free yourself from debt, the better.
Your current vehicle won't last forever, no matter how diligent you are at taking care of it. When it comes time to buy a new car, will you have saved enough to make the purchase in cash? As you get older, you should be systematically reducing the number of financial obligations you're saddled with -- not adding on new ones. Car loans take from three to seven years to pay off. (The current average length is around 5½ years.) Even if your current car lasts you well into your 50s, financing a new one could mean that you'll be facing loan payments into your retirement years. Instead, plan ahead so you can pay cash.
If you're married, have children or support your parents financially, you should have term life insurance. Tragedies can happen at any time, and term insurance can help you create a Plan B for the benefit of those who rely on you. If you're healthy, you can get term life insurance coverage with a $500,000 benefit for roughly $29 a month. That's a small price to pay to know your family will be cared for if anything happens to you. The longer you wait to get that coverage, the higher your price will be.
Just like life insurance, disability insurance is a wise investment. (And, just like life insurance, the longer you wait to get it, the higher your monthly payments will be.) Should you fall ill or get injured and be unable to work for a period of time, disability insurance can pay out 50 percent to 70 percent of your income. Hopefully, you'll never need to use it -- but you never want to be in a spot where you do need it and you don't have it.