SECURITY, SERVICE AND COST: PICKING A FINANCIAL INSTITUTION
Lori Z. Bahnmueller
Michigan Credit Union League - Your Money Matters
Most of us pay lots of attention to earning our money. We work long hours, study our business, research the competition, monitor our boss' reaction, cater to the client's whim and diligently seek opportunities to make more money. Once we have the money, however, we are sometimes thoughtless of how we handle it.
For example, take choosing the financial institution where you deposit your money. How did you pick it? Was the location convenient? Did your parents save there? Were they offering a free phone card the week you needed a checking account?
Banks, savings and loans, and credit unions are the three most common types of financial institutions for basic services such as savings, checking and personal loans. Banks and most S&Ls are businesses that make profits from their customers for their stockholders. Credit unions are not-for-profit cooperatives, owned by the members that conduct business there. Every bank, S&L and credit union is at least a little different from every other--even among those in the same category--and consumers need to choose their financial institutions carefully.
There are three basic concerns when choosing a financial institution: financial security, services and cost. Although years have passed since the S&L crisis, security is not to be overlooked. In Michigan, banks, S&Ls and credit unions all carry the same federal deposit insurance coverage--basically $100,000 per account holder.
Services, however, can vary widely between institutions. Begin by making a list of your needs: checking, savings, auto loans, a mortgage, CDs, etc. If you're looking for two billion dollars to finance an oil exploration project in Siberia, you're going to need a major commercial bank. If you want a savings account with a good interest rate, a checking account with low service charges and low-interest rate auto and personal loans, a credit union might be perfect.
Once you've determined your needs, it's time to compare costs. There are often significant differences between institutions when it comes to charges, rates and fees. Take your personal list of what services you want from a financial institution and start calling those in your area. Ask for a complete explanation of fees and note such things as minimum balance requirements, charges for writing checks, ATM fees and monthly service charges. Be realistic about your needs. How many checks do you write each month? How much will you actually keep on hand in a savings account? Do you use an ATM frequently?
Be aware that banks and S&Ls are commercial institutions open to anyone with enough money to afford their services. Credit unions, on the other hand are member-owned cooperatives and you must be a member to use their services. Typically, credit unions serve local communities or employee groups. Often, family members of current credit union members are also eligible. To see if you qualify for membership, check with your employer, ask a family member or call credit unions in your area.
Don't forget to factor in convenience. If you work next door to a bank, chances are it would save you time to do business there. If the credit union on the other side of town has no fee for using an ATM machine, location may not be important.
What is important is that your financial institution of choice is meeting your needs effectively and without costing you more than it should. You work hard for your money. Make certain that it works hard for you by choosing the right place to put it.