VOL. 128 | NO. 56 | Thursday, March 21, 2013
Rays of Wisdom
Dana and Ray Brandon
Explore Alternatives to Banks
RAY and DANA BRANDON
Ray’s Take In decades past you built a relationship with your bank and, more importantly, your banker. After so many mergers, that’s become harder to do. Generation low interest rates have banks piling up fees on their customers as well as limiting services It might be worthwhile to at least consider options other than the neighborhood brick-and-mortar bank.
One option is credit unions. At credit unions the customers are the owners. These nonprofit institutions have no shareholders or outside owners expecting a return on their investment. This means credit unions sometimes pay higher interest rates on savings and charge lower interest rates on loans. In addition, they often have fewer and lower fees for services.
One limiting factor is you must find a credit union to accept you as a member/owner. They often limit services to certain employee groups or to people residing in specific areas. However, don’t be discouraged. Sometimes relatives or even friends of existing members can be included as members. A quick online search would let you know if any credit unions in your area are right for you.
When evaluating credit unions, be sure they have the range of services you want, ATM availability, and are NCUA insured (the credit union equivalent of the FDIC). If you have a child away at school you need to “help” from time to time, a regional or national bank with lots of branches might come in handy.
You might also consider online banking as a way to reduce banking fees. Institutions like Capital One 360 can offer fee savings and better interest rates because their automated services help reduce overhead. They also offer advanced technologies for easy and immediate online bill paying.
In fairness to the banks, they didn’t cause the historic low rates. But if you’ve grown increasingly disenchanted with the costs and relative services of traditional banking, in addition to the revolving door of owners, officers and tellers, it might be time to investigate the alternatives.
Dana’s Take Ray and I were recently lamenting the loss of interest income from our money market account. We used to earn a pretty penny on that account and now it’s closer to a penny. The same goes for savings accounts.
It could take a couple of years of economic recovery before that type of interest income returns. In the meantime, consumers are particularly vulnerable to scams – especially seniors who counted on interest income from CDs.
So when you’re considering alternatives to traditional banks, do your homework. Make sure that deposits are insured by the federal government and find out what the limits are. In an effort to earn a few more percentage points, don’t risk your nest egg.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker.