How to Choose a Bank or Credit Union You Can Trust
You may have met someone who says they don’t trust banks and stuff their money under the mattress. You write off them and continue to use your debit cards and checking accounts. Then something like Wells Fargo happens , and suddenly hiding your money doesn’t seem like such a bad idea.
For the most part, despite our concerns, banks serve us well. Our money is there when we need to pay rent. We can transfer cash whenever we want. The system works well for day-to-day transactions, but that doesn’t mean banks are completely trustworthy. Many clients learned of this during the 2008 banking collapse , when banks were little affected by shady business practices. This recent news from Wells Fargo is a discouraging reminder that banks may be doing covert illegal activities with your personal information, or worse, your money. Trusting a bank has never been easy, but it seems impossible these days. So how do you choose the one that is truly trustworthy? Here are some options.
What does your bank have to offer at least
At the very least, your bank must be FDIC insured. Credit unions are also insured, but not FDIC. Instead, deposits are insured by the National Credit Union Authority (NCUA). This means that in the event of a bankruptcy, the Federal Deposit Insurance Corporation (FDIC) or NCUA will almost certainly make sure your money is safe. Large banks are usually FDIC insured, but you can check bank status here and NCUA credit union status here .
Make sure your bank also offers online security and fraud protection. Your bank must use two-factor authentication , which will force you to go through an extra step to verify your identity. They also need to encrypt your transactions, that is, they encrypt your information so that hackers cannot gain access to it. Some banks offer 256-bit encryption, but they should at least offer 128-bit encryption.
A good bank also has some kind of protection against fraud. For example , here is Ally Bank’s policy :
At Ally Bank (a member of the FDIC), we guarantee that you will not be held liable for any unauthorized online or mobile banking transactions if you report an unauthorized transaction by calling us at 1-877-247-2559 within 60 days of receiving your statement. available.
Most standard banks make good use of these three basic protections. However, these are not bonus features – they are a must for any bank account. We know that even with this kind of protection, your bank can still trick you or be tricked by a hacker or data breach.
Examine the bank’s reputation
The FDIC does offer quite a bit of detail about your bank. Detailed information on the bank’s taxes, assets and expenses can be found in their Directory of Institutions and in the financial statements of calls and savings . If not quite a voyeur, this information is helpful if you know what you are looking for. In general, you just want to know what other customers are saying about the bank.
This is where the Consumer Financial Protection Bureau (CFPB) comes to the rescue (it is also responsible for imposing a $ 100 million fine on Wells Fargo ). They have a complete database of consumer complaints and you can sort them by various details, including account type, date, and company. Click the Company tab for the appropriate sort, then scroll down and find your specific bank. The tool will show you the complaints filed against this bank in recent years.
They also track consumer stories. Some consumers tell CFPB they want to share a description of their complaints so others can learn from their experiences, and you can find these descriptions in detail here . For example, here’s one about Wells Fargo that seems to summarize their recent scandal pretty well:
You can, of course, also examine the details of credit unions. The NCUA has its own database that offers detailed information on credit union status, number of members, and assets.
Sometimes news agencies and other organizations also rank banks and credit unions according to customer satisfaction. Customer satisfaction does not guarantee the bank’s reliability, but it does not interfere with knowing.
Use a credit union instead
The Wells Fargo scandal stemmed from employees trying to keep up with sales. After all, Wells Fargo is a big company that works for profit. Like any other company, they have sales goals. Unlike a bank, a credit union is non-profit .
Credit unions have no clients; they have members. We’ve already told you about the differences between banks and credit unions before, but Dallis Bergle of the federal credit union Inova sums it up pretty well :
If you have an account with a credit union, you are a member and owner … As a member / owner, you have the right to vote and run for the Board of Directors. You only get one vote no matter how much money you have in the credit union, and all of our directors are volunteers and are not compensated for their services. This process ensures that your credit union is looking after your financial interests and not the interests of a small group of shareholders.
Of course, Bergle is the president of the credit union, so his opinion cannot be 100% objective, but our readers are also big fans of them . Typically, most credit union members can only say the best about themselves. The same can hardly be said about the bank’s clients.
Credit unions also generally have higher interest rates and lower fees. However, many are for members only, and some may not have the same amenities as banks. The good news is that many of these troubles are easy to get around .
Diversify, don’t rely on one account
However, even from customer reviews, it is difficult to predict which direction the bank is heading. One bad leader is enough to fool a bunch of people. In truth, while keeping money in a US bank is generally pretty safe, there is no guarantee that you won’t face a different situation with Wells Fargo.
One Certified Financial Planner at Quora offers a simple solution: diversify.
The problem is that there are no truly 100% safe places to store wealth. So instead of putting it all in a bank, try placing it in stock brokerage houses, some in savings banks, some investing in real estate, and some working for you in your own business. This is probably the safest way to save money … and make sure at least some of it is there when you need it.
Obviously, this is sound advice when it comes to investing , but it’s still good advice even if you don’t have $ 100,000 to diversify. You may find it unsafe to keep all your cash in one bank, in which case you can diversify. For example, if you have a checking account with Chase, you can leave a small savings cushion there, just to protect against overdraft, and keep the remaining savings in, say, Ally. This might be overkill considering Wells Fargo customers haven’t quite lost all of their savings, but if you really don’t trust banks, keep your money separately at a couple of banks you trust the most.
What to do if your bank is screwed up
Again, it is difficult to ensure that your bank does not go bankrupt in any way. If they do, you can file a complaint with the Consumer Financial Protection Bureau (CFPB), be it a mortgage, savings account, credit card, or any other financial product. The CFPB will add your complaint to its database and will try to find similar issues with your financial institution. If they find a pattern of complaints, they can further investigate.
They also report the complaint to the financial institution, which gives them the opportunity to contact you and try to resolve the issue.
People are becoming more and more suspicious of big banks, and with this latest news, it’s not hard to see why. The good news, however, is that there are resources dedicated to giving consumers a little more options. At the very least, it can be a good reminder to move to a better bank or credit union.
Illustrated by Sam Woolley; photo: brauerranch , Dennis Danen , Mike Mozart , Matt Lucht , Tax Credits