‘Perks’ Don’t Make the Bank — Rates Do

Alice Holbrook
By Alice Holbrook 
Edited by Tony Armstrong

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Banks love to boast about their accounts’ benefits and features. But if you’re shopping for a new account, it pays to read critically: You might find that some of these benefits sound more and more like the bare minimum.

When a bank touts its cutting-edge security and massive free ATM network, it’s likely just “puffery,” says Jim Frazin, certified financial planner and principal at Communitas Financial Planning in Oakland, California.

What truly sets a bank apart from the pack are the fees it charges (or doesn’t charge) and the rates it pays on your balances. It’s not hard to find a savings account paying a 1.75% annual percentage yield or higher; compare that with the national average savings APY of only 0.09% — and some banks pay as little as 0.01%. And if your bank doesn’t measure up when it comes to rates and fees, it might be time to switch.

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Most banks have: Robust security

It’s standard for banks to provide chip cards — which are more secure than traditional magnetic stripe cards — and offer services such as text alerts for purchases and the ability to turn a debit card on and off. Fraud monitoring is also typical.

And you’ll want to make sure your bank is federally insured, says Stephen Brobeck, a senior fellow at the Consumer Federation of America. But almost every bank is. That means your deposits are protected, up to $250,000 per person per financial institution, should your bank or credit union go bust.

It’s still smart to practice good cyber-hygiene while banking, such as using a unique, hard-to-guess password. But your account should have its own security protections. “Credit unions and banks need to have those things in order to do business,” Frazin says.

Most banks have: Online banking via web and app

Most banks have solid apps nowadays, and it’s nearly impossible to find one without a web presence. This likely includes the ability to deposit checks with your phone, as well as features like online bill pay, according to Jim Hebenstreit, CFP and sole proprietor at ClearView Financial Planning in El Segundo, California. "There’s no charge for that in most cases,” he adds.

That’s key: If you have to pay for it, it’s not a benefit. You should be able to access your account online and on your phone for free.

Most banks have: A free ATM network

Your bank should offer a way to obtain cash for free on the go — typically, that includes an ATM network. National chains such as Chase and Wells Fargo have more than 10,000 ATMs across the country; online banks such as Ally and Discover often have networks of 40,000 or more.

“Some online banks even have ATM cards where they’ll reimburse you the fees” charged by non-network ATMs, Hebenstreit says. “They want your business.”

And Frazin notes that the Co-op ATM network, made up of participating credit unions, offers almost 30,000 ATMs nationwide for free. “That’s greater than Bank of America and Wells Fargo put together,” Frazin says.

What sets banks apart: Rates and fees

Banks with mobile apps are a dime a dozen. But comparing banks’ rates and fees can actually make a difference in your balance over time.


You don’t have to settle for a 0.01% APY, but you couldn’t tell from looking at the average brick-and-mortar bank. “You’re an ultra-special preferred platinum customer, so you get … 0.05% interest,” jokes Hebenstreit. “You’re losing money to inflation.”

“The rates are so low unless you have stupendous sums of money. And if you have stupendous sums of money, you ought to put it elsewhere,” Brobeck says.

Where? Credit unions and online banks typically pay better interest rates, although brick-and-mortar banks sometimes offer generous new customer promotions. In a case like that, Hebenstreit recommends opening an account and linking it to an online bank for easy transfers. Keep in mind that getting 2.00% can earn you about $100 per year on a $5,000 balance, while 0.01% will earn you about $1.


But the interest you’re earning won’t matter if your account also charges fees. Monthly maintenance costs can be as high as $15 at brick-and-mortar banks, and a recent NerdWallet study found that their average overdraft fee is $35.

To lower your fees, credit unions and online banks can come to the rescue again. Because credit unions don’t pay shareholders, Frazin says, they can offer lower costs to members. And online banks don’t have to pay for branches. In either case, free checking and savings accounts are common.

Your bank should absolutely provide online access, safety, and a convenient way to get your money — but that’s just a baseline. To truly get the most from your money, find a bank that’ll pay you above-average interest and won’t charge you fees. And if that doesn’t sound like your bank? Think about choosing another one.

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