3 Reasons To Ditch Your Bank

Other than the convenience factor, there are some good reasons to stay local when it comes to banking.

May 4, 2014 at 2:28PM

Big banks are popular for one main reason: they are convenient. I recently took a trip involving six different states, and everywhere I stayed was within a five minute drive of a Wells Fargo, which certainly made it easy to get cash and make deposits. However, if you don't really need the convenience factor, your local credit union could be the way to go. According to a report by WalletHub, there are several good reasons to keep your money local, and some of these might be more compelling than the nationwide access offered by the large institutions.

Lower fees
Perhaps the most noticeable difference between big banks and credit unions is the fees they charge. For instance, national banks charge a $14.56 average monthly fee on a standard checking account, and typically require a minimum balance of nearly $5,500 in order to waive the fee, according to WalletHub.

In contrast, the average credit union charges a monthly fee of just $2.03. Credit unions also charge 33% less on average to use a non-bank ATM, as well as about 24% less in the event of an overdraft or insufficient funds charge.

Better features
In order to entice consumers away from the bigger, more convenient competitors, credit unions offer more value and features for the money. For instance, 70% of credit unions have no minimum balance requirement or monthly account fee on a standard checking account, as opposed to just 4% of national banks.

Credit unions are more likely to give away features such as online bill pay, and to pay interest on standard checking accounts. In addition, they are less strict about the amount of money needed to open an account, and almost 70% offer reimbursement of fees charged by other institutions' ATMs. Check out the likelihood of finding certain account features at your credit union.

Every little bit helps
Bank interest isn't what it used to be. The days of collecting 3-4% on your savings account are long gone. However, every little bit helps, and choosing to collect lower interest is like giving away money.

A checking account with $3,000 in it at a national bank will pay you around 0.07% interest each year, about one-seventh of the 0.51% rate you can expect from a credit union. While this won't make you rich, and is certainly no substitute for a good investment account, it is a difference of $13 on a $3,000 balance, and will cover some of the small fees the credit union charges.

On a CD, however, the difference is more significant. A lot of people like to keep a good chunk of cash in CDs as part of a safe retirement plan, or to simply have some cash available if needed. The average interest rate on a 5-year CD is 1.56%, nearly triple the 0.59% average at national banks. Over the life of a $10,000 5-year account, this would result in $500 more in returns, which is certainly a significant amount of cash. The difference is pretty significant on other time frames as well.

Other great reasons to ditch your national bank
As my fellow contributor Jessica Alling recently wrote, there are plenty of other benefits to joining a credit union. In addition to collecting more interest on your deposits, you'll also pay less interest on loans and credit cards. Credit unions also get better ratings for customer service, and are more flexible when meeting your individual financial needs.

If you can live without the convenience of having a branch of your bank on every corner, it is definitely worth looking into how much of a difference it would make to switch to your credit union.

Is this bank better than all the others?
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers