Financial Education

What military families should look for when choosing financial institutions

People choose a bank or credit union for a variety of reasons—location, number of ATMs, or even a family history with an institution can all play a part. But for military families, there are certain considerations that must be taken into account due to the nature of military life.

How you use it
The first thing to decide is what you are looking for in a bank. Is it just some place to keep your money? Do you want to use it as your primary lending source? Do you need assistance with investing? How often do you actually go to the branch office? What other services are important to you (such as wire transfers, how they handle deposits, etc.)?

How you answer those questions will determine if you need just a basic savings or checking account, or a more full-featured account that provides additional services.

Fees
How much a bank charges you for certain transactions—or even pays you interest for keeping your money with them—can vary greatly from bank to bank. Compare fees for everything from bounced checks, transferring funds, and cash withdrawals from ATMs. With ATM fees, make sure to compare all of the charges, since some may charge on their own machines after a certain number of transactions, for withdrawing money and even simple balance inquiries from another bank’s ATM.

If you intend on using the bank’s lending services, get an idea of what interest rates and terms they offer. And if they provide financial planning services, see if it is a flat fee, or if it depends on the type of consulting offered.

Also look into fees for things like online banking, getting new checks, and minimum balance requirements.

Accessibility
Since military families move so often, a key feature will be national (and even international) access. Larger national banks may have branches all over the nation, while a smaller regional bank may have more robust and free online services. And which one you need will depend on how you use your bank.

For example, if you prefer to go into a physical branch office for most of your needs, you’ll need to consider a national bank in case (or, more accurately, when) you or your spouse is moved to a new duty station. But if you prefer to handle things online or over the phone, branch locations won’t matter as much.

Trust
A study by the Better Business Bureau (BBB) and Gallup, conducted April 2008, showed a decrease in consumer trust in nearly every industry from the prior year. The banking industry was no exception, as high-profile problems have led to nearly 20 percent of respondents saying they have little or no trust in financial institutions, an increase of 25 percent from the previous year.

While you can call your local BBB before making a final decision on what bank you use, you can also contact the federal agency responsible for regulating the bank, and there are numerous non-government ratings agencies—such as A.M. Best—that offer assessments as to a bank’s relative health and history.

Your money is also protected by the Federal Deposit Insurance Corporation (FDIC). While there are often-complex rules and stipulations about coverage for different types of accounts, there are a few simple things to remember:

  • You are covered up to a total of $100,000 ($200,000 for joint accounts) per depositor, per insured bank. For example, if you have a checking account and a CD at the same insured bank, and both accounts are in your name only, the two accounts are added together and the total is insured up to $100,000.

  • No depositor whose account was within FDIC insurance limits has ever lost a penny in an FDIC-insured deposit account.

To learn exactly what types of accounts qualify for coverage, and the corresponding amounts, visit the FDIC’s Web site and click on the “Deposit Insurance” tab at the top of the page, or call toll-free at 1-877-275-3342.

Basically, if trust is a concern at a certain bank, you can either find as much information as possible to reassure yourself online, or simply go to another bank. And if your concern is trust of the industry as a whole, you can rest assured there are plenty of safeguards in place to prevent you from losing your money should something unforeseen happen to the bank.

Other considerations

  • Minimum balances—Most accounts with minimum balance requirements pay interest, but the fees for not meeting that minimum can be higher than any interest you’ll earn. If possible, avoid any account with minimum balance requirements unless you’re sure you can meet them.

  • Service—Your bank should see you as a partner, value your business, and not treat you differently based on the amount of money in your account. So if you do a lot of your banking by going into the branch and talking with the staff, make sure they treat you with respect and are eager to answer any questions you have.

  • Word of mouth—While keeping fees and access in mind, also ask friends and family where they bank, and what their experiences have been like, both good and bad. You may learn that the huge, national bank that seemed popular actually isn’t, while the little local or regional one has amazing service and comparable fees.

In the end, as long as you pick a bank that is interested in your financial success, has fair and clearly-explained fees and rates, treats you right, and that you feel comfortable with, you should have a long-lasting and successful relationship.

Helpful links:

  • FDIC list of ratings agencies—A comprehensive list of non-government ratings agencies, including methods, cost of reports (some have a fee), and links to their sites.

About Joe Freeman
Joe Freeman is Chief Operating Officer for Pioneer Services, the Military Banking Division of MidCountry Bank. He is responsible for all lending and retail operations, strategic planning, and manages a diverse group of more than 200 associates spread across various geographic locations.

Freeman has more than 15 years of experience in accounting, operations, consulting, and marketing. He is a successful entrepreneur, a former manager in a Big Five accounting firm, and an expert in managing operational processes, improving efficiencies, and developing strong executional teams.

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