Criteria when Choosing a Bank

In looking around for the financial institution that best serves your purposes — assuming there is more than one commercial bank, savings institution or credit union to choose from where you live — first determine what you really want to use it for: savings, checking, a credit card, online banking, a personal loan or home mortgage, stock purchases or a combination of several or all of these. Compare each bank’s offerings and policies on minimum balances and fees.

On the other hand, don’t overlook the length of time each holds different kinds of checks deposited in your account before permitting you to draw on the funds they represent. Most banks clear a local check immediately or in a day or two, but others can take as long as 10 days; in a few instances out-of-town checks have taken as long as three weeks to clear.

Banks have claimed that they maintain waiting periods in order to prevent losses on bad checks, but critics have pointed out that only about 1 percent of all checks passed turn out to be no good. Moreover, banks can get credit for checks from the Federal Reserve usually within 24 to 48 hours, then invest the money to make more money for themselves, a strategy known as “playing the float.” In effect, depositors are giving the bank free loans of their money for days or even weeks. Public and legislative pressure has already forced banks to cut down on their holding time, but it still pays to compare. Ask also if a bank officer can give clearance to make needed funds immediately available in emergencies, or to cover checks written against deposits you were given to believe had already been credited to your account.

If there is a chance that you will need a personal loan or a new mortgage within the next year or two, by all means inquire now about a bank’s rates and policies. Many banks will give their depositors preference over others, particularly when loan money is tight. If you are a good customer — and if you ask — you may even be able to get a preferential rate as much as 1 or 2 percent lower than that offered outside applicants.

In picking a bank, it is well to bear in mind two facts of financial life. One is that bankers, especially when they are parting with depositors’ money, like to deal with someone they know. The second is the Golden Rule of 80-20: some 80 percent of a bank’s income, on average, derives from 20 percent of its clients — so it pays the bank to be particularly cooperative with that ctop one-fifth. Putting those facts together before starting to deal with a bank at least starts a customer on the right track. To the two banker’s canons you might add one of your own: banks need you at least as much as you need them.

Read more: Shopping for a Bank