Is Your Bank Ripping You Off?

Is Your Bank Ripping You Off?

Photo courtesy of Dan Moyle

The bank you use matters. Picking one of the good banks, and avoiding the bad ones in the process, can save you a lot of money, maybe even hundreds of dollars per year.

But most people don’t spend much time thinking about their bank. In fact, a lot of people don’t even know just how bad a deal they’re currently getting.

There’s a good chance you’re with the same bank you chose 5 years ago because they had a branch close to your house. You might even be with the same bank that gave you a free t-shirt during your first days on your college campus, or the bank your parents helped you open a savings account with when you were 10.

That would be pretty normal. Switching banks isn’t exactly the most exciting thing in the world and it can be a bit of a hassle. Much easier just to stay put.

But it can be a huge money-saver, and it can also make your life a lot easier. So let’s take a few minutes to talk about exactly how your bank might be giving you a raw deal, and how you can find a better one.

What are the characteristics of a bad bank?

It’s not that hard to spot a bad bank. They all share a lot of the same characteristics.

1. They charge lots of fees

  • Monthly fees – Just to keep the account open.
  • Overdraft fees – Either a fee charged any time your overdraft your account or a fee to link a savings account to your checking account to handle overdrafts.
  • ATM fees – A fee any time you use an ATM not associated with the bank.
  • Balance fees – Penalties for having your balance dip below a certain minimum required amount.
  • Inactivity fees – Penalties for not having enough transactions in a given month.
  • Teller fees – A fee any time you want to speak with a teller at the local branch.
  • Special service fees – Anything slightly out of the ordinary, like getting a cashier’s check, will cost you.
  • Anything else they can dream up – Seriously. Just about anything depending on what bank you use.

2. They pay pretty much no interest

I wouldn’t spend much time worrying about whether your bank offers “the best” interest rate, but it would be nice if it was at least competitive.

A lot of the big national banks pay 0.01% interest. At that rate, I mean, what’s the point of even having interest?

3. They have restrictions

A minimum monthly balance. A minimum number of monthly transfers. Requiring direct deposit.

If you don’t do those things you’re charged an extra fee. These restrictions can cost you money and make your banking experience more difficult.

4. Bad customer service

When’s the last time you called your bank to ask a question? Was it a pleasant experience? A lot of banks seem to go out of their way to make you feel like an insignificant nuisance.

5. Bad online banking

I don’t know about you, but I do pretty much all of my banking online these days. So if a bank has a bad online interface, it’s simply not going to work for me.

Unfortunately, this is still a big weakness for a lot of the local credit unions I’ve checked out. Which is really too bad since they’re often great in all the other areas. But I just can’t use a bank with bad online tools as anything more than a backup.

How can you find a good bank?

Here’s the thing: most of the big national banks hit most of the points above (with the exception of bad online banking). They charge lots of fees, pay no interest, have lots of restrictions, and have bad customer service.

So where can you turn?

Simple: online banks.

Online banks don’t have branches, but the good ones do everything else that the national banks do, and most of the time they do it a lot better.

Here are some of the advantages of a good online bank:

  • No fees for a lot of the common things that bigger banks charge you for.
  • When there are fees, they’re usually much lower.
  • Competitive interest rates (0.5-0.9% these days in most cases).
  • Great online banking (they’re online banks after all!)
  • Reimbursement of all ATM fees
  • Great customer service
  • Ability to deposit checks with your phone (the big banks offer this too, but sometimes people wonder how you would deposit checks with an online bank. This makes it really easy.)

The only thing I’ve found that I needed to do on rare occasions and couldn’t with an online bank is deposit cash. For that sole reason, I like to have a free checking account with one of the local credit unions (no fees or minimum account balances) just so I can deposit cash there and immediately transfer it to my primary online checking account.

Other than that, I haven’t found a reason to actually need a branch in years.

The bank I’m using now, and love, is Ally Bank. They hit all of the points above, and I really couldn’t recommend them highly enough. They’re great.

NerdWallet also has a good list of online banks if you’d like to find one for yourself.

Don’t let your bank rip you off

There are too many options these days to just pick the bank with the branch near your house and settle for all the ridiculous fees and restrictions they put on you.

If your bank is ripping you off, I challenge you to break free and find something better. You’ll end up with more money in your account and fewer hassles all around.

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  • Emily @ evolvingPF August 14, 2014

    Great comprehensive post! I’ve been a happy customer of internet banks for seven years now. I suppose there are a few life situations that might necessitate access to a brick-and-mortar bank, but they are diminishing. It puzzles me whenever I meet a young tech-able person who still uses one of the big money/time-sucking banks!

    • Matt Becker August 14, 2014

      Thanks Emily! I think the big reason a lot of people still use the big banks is that they don’t know that there are other options. For whatever reason, the online banks just haven’t gotten as much publicity as they deserve. Hopefully this helps!

  • Kate @ Money Propeller August 14, 2014

    Sad to say that most banks in my country have charges like the bad ones that you listed like monthly fees, overdraft fees, ATM fees, balance fees and inactivity fees. But my current bank has a great online banking, but still it has a lot of charges.

    • Matt Becker August 15, 2014

      Sorry to hear that! I would say it’s still the norm here too, it’s just that the online banks now give you other options. Hopefully we’re all moving in a direction towards lower fees all around.

  • Elisabeth August 21, 2014

    Do you (or your readers) have any recommendations for “good” banks with good money managing features? We currently use PNC for our joint checking account, which doesn’t make a lot of sense from a fee perspective, and we don’t even have the brick and mortar benefit, since we moved to where there are no PNCs. I’ve been thinking about switching, but the thing that is stopping me is that I have become really dependant on some of PNC’s features. For example the money bar, which tells me how much money is “available” vs. “scheduled out” and the ability to see exactly when money will come in and out on the calendar. This is great, because I have so many different things on auto-pay that I don’t want to keep track of them, and some of them (like utilities) vary from month to month. Plus, with both my husband and I using the account, I like to know exactly how much we have available at any given time. Anyhow, this is a long way of saying, I’d like to get out from under PNC, but I haven’t found a good source that covers the user experience of online banking at other banks. I’d love to find another cheaper bank with similar features. Any recommendations?

    • Matt Becker August 22, 2014

      Hi Elisabeth! It’s a great question and I’m sorry to say that I honestly don’t have a great answer for you. I definitely understand the need to track your cash flow like you’re describing, but I’ve always just done it myself. The features through PNC do sound pretty cool though (and much easier!). I’ll see if I can do a little research for you and I’ll let you know if I come up with anything good.

      I don’t know if you’ve ever looked into You Need a Budget, but I believe it helps track this kind of thing as well. It’s a one-time cost, but depending on the fees with PNC may be worth looking into.

    • Matt Becker August 25, 2014

      Hi Elisabeth. My friend Erin, who works for the site Magnify Money, recommended Simple as an online bank with a tool similar to what you’re talking about. You can read more about it here. I’ll admit that I know nothing about it so I can’t advocate one way or the other, but it does seem to be a good match for what you’re looking for. Of course, she also recommended Ally or Capital 360 as great online banks, just not necessarily with the tool you’re looking for. I hope that helps and definitely let me know if you end up trying it out!

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