Interest rates have hit rock-bottom these days, prompting many people to chase after the highest rates they can get on bank CDs. Even so, this might not always be the rightful utilization of time and effort. Here’s why: let’s say you have $25,000 and are on the hunt for a CD. Even with significant effort, the highest rate you could land would perhaps be 1%. Yet, if the offering is only .5%, you’re not actually missing out on much.
1% of $25,000 equals $250 annually, whereas .5% means you would earn $125 instead. What really matters is the time and money it costs you to secure that 1% rate instead of .5%. If you can easily stumble upon that 1% rate, definitely take it. However, if it requires numerous hours of errands and paperwork, it may not be worth the trouble. Does this signify that one should be indifferent when it comes to selecting a bank? Absolutely not.
Service is paramount. A majority of banks acknowledge your limited scope to acquire a higher rate, but they’re still eager for your patronage. Ensure that they compete for it, insisting on exceptional service. If the staff doesn’t treat you professionally, signal that it’s unacceptable by moving your account elsewhere. Importantly, explicitly inform your new bank why you’re initiating a new account. Develop a rapport with a personal banker at the branch and clearly state your expectations. Secure a commitment from them to deliver superb service and hold them responsible for fulfilling it.
Fees are another aspect you shouldn’t neglect. Resist the temptation of letting a fee chart fool you into thinking it’s okay for the bank to profiteer at your expense. The bank earns its profit by providing you negligible returns and offering your money to others at higher rates. If you’re hit with banking fees, don’t tolerate it. Ask your personal banker to waive these charges, or else.
The comfort of banking is of utmost importance. Given the low-interest rate scenario, it’s clear that your time is exceptionally more worthy than meager bank interests. Choose to bank with an institution that’s easy and convenient for your particular needs. For instance, a bank with user-friendly online access could be prioritized. You might prefer a bank that can answer your calls 24/7 or at least as near to that as feasible. Also, banking with an institute that meets all your transactional requirements is ideal.
If you own a small venture, have personal and savings accounts besides CDs, it’s crucial that your chosen bank offers all these services. It’s counterproductive to deal with multiple banks serving different needs. Investing that time is not cost-effective.
Nonetheless, if you prefer a bank with consistently higher interest rates and often rollover your funds, consider an online institution like CIT Bank. They typically offer higher rates due to low operating costs. They, however, don’t facilitate checking accounts. So, if you need both, you might still consider local traditional banks, even though they pay less interest.
In conclusion, you should contemplate your entire financial scenario before deciding on a bank. Although interest rates are important, with the current low rates, your time becomes the more important asset. Prioritize excellent service, low fees, and convenience when choosing a bank. Only then should the interest rates come into play.
How do you select your bank? Is your decision only based on interest rates?
The following is a guest post by Neal Frankle, a Certified Financial Planner in Los Angeles and a dedicated blogger at Wealth Pilgrim.com. He is an experienced professional, assisting people in making smart financial decisions for over three decades.
