Nick Foy, CFP®
The traditional brick-and-mortar bank is a relic of days gone by, like cable TV and Myspace. If you’re still using one, it might be time to reconsider your life choices, at least as it relates to the location of your checking and savings accounts.
Most of the people I meet with have accounts at either Bank of America or Wells Fargo. In Charlotte, I suspect a significant majority of people bank at one of those two behemoths. I’m assuming most people who have accounts there maintain them out of convenience: They think it’s too difficult to make a change, or they don’t understand how significant the advantages are to banking elsewhere.
Here are two reasons to consider switching to an alternative banking option:
- Interest. Traditional brick and mortar banks don’t do interest. They’d apparently rather keep the money than pay it out to their customers. Want a Wells Fargo savings account? Sure. Their WaytoSave account costs $5 per month, and they pay 0.01% in interest. You’re better off stashing the money under your mattress.Some of their accounts have slightly higher yields, and you can avoid the fees, but you’ll need to be a genius to figure out exactly how.
Plus, after all of their most recent headlines, I’m assuming most Wells Fargo customers have just forgotten they have accounts there.
Bank of America is just as much of a joke. Their savings account yields range from 0.03% to 0.06%, depending on the balance and banking relationship.
Want a better option? Plenty of banks have online savings accounts that are FDIC insured and yield 1.85%.
An even better option? We’ve partnered with Max which helps automate the process of finding the banks with the highest interest rates, and will automatically transfer your money to maximize the available interest.
- Fees. Never, ever pay a bank fee. Ever. Your savings account should be fee free. So should your checking account. As an example, Schwab Bank offers a fee free checking account with unlimited ATM rebates, and no minimum monthly balance. TD Ameritrade has the same offer. The accounts also have BillPay, and you can even transfer your old BillPay settings over from your archaic brick and mortar bank. The Schwab account also pays 0.25% in interest, which is about twenty-five times what Bank of America pays.Schwab and TDA even have branches that you can walk into should you need to make the once-every-five-years trip into a bank.
Also, avoiding a bank fee should not require reading multiple bullet points. They just shouldn’t charge them, or at least you shouldn’t pay them.
There are plenty of options to earn more interest, avoid fees, and have an overall improved banking experience. Traditional banks depend on customers fear of change in order to continue dominating their industries, but technology has made a branch obsolete and offers people a better banking experience.