Finding The Best Bank Account

I recently read an article in the Daily Telegraph from the UK, which looks at finding the best bank account, a topic which I've of course written about before on Choosing The Best Account.

While the Daily Telegraph article focuses on UK banks and bank customers, the issues will be interesting to all those who are asking themselves “which is the best bank for me”.

The article found that the British public are very resistant to changing banks, especially when it comes to current accounts. I suspect that is true in other places as well and we'll talk about that later.

Banking Terminology – Current Account

Let's pause for a minute and sort out the terminology. For those that don't know the UK terms, a current account is roughly equivalent to a checking account in the US. Both are transactional accounts. As Wikipedia says on transactional accounts:

Transactional accounts are meant neither for the purpose of earning interest nor for the purpose of savings, but for convenience of the business or personal client; hence they tend not to bear interest. Instead, a customer can deposit or withdraw any amount of money any number of times, subject to availability of funds.

Wikipedia goes on to talk more about what a current account is and give some more information about what the typical current account is like in the UK:

Current account is the name given to a transactional account in the United Kingdom and countries with a UK banking heritage, offering various flexible payment methods to allow customers to distribute money directly to others. Most current accounts come with a cheque book and offer the facility to arrange standing orders, direct debits and payment via a debit card. Current accounts may also allow borrowing via an overdraft facility.

So that's what a current account is: a transactional account, similar to a checking account. Its purpose is to manage every day expenses, rather than saving money etc.

Reluctant To Change Current Account

Now that we've put the terminology to bed, we can get down to the point of the Daily Telegraph article. It states that the average customer in the UK is very unlikely to change their current account, despite widespread consumer dissatisfaction with UK banks. They quote a survey by Age Concern, a spokesmen of whom goes on to say:

Married couples are around three times as likely to divorce than to change bank. Despite a consumer backlash over unfair bank charges‚ many unhappy bank customers are still failing to vote with their feet.

The statistic about married couples being 3 times more likely to divorce than to change bank is a mind blowing one. You shouldn't just change banks for the hell of it, but it should be something which people are open to doing and are actively looking at on a periodic basis.

As for marriage, well, I'm not giving advice on that, but if you've got problems you should be asking yourself: how can I save my marriage? Give up on a bank? Yes! Give up on marriage? No! I hope we've got that straight now!

Great Incentives To Change Bank

The article goes on to say that banks are offering great incentives to open a current account with them, knowing that once you do, the chances are that you'll be staying with them for a long time. For example, First Direct and Alliance & Leicester will both pay you £100 to switch to certain current accounts.

Hmm, great incentives to switch account? That sounds like something I just wrote about in my last post on great deals at selected banks. As I said in that post, you better be wary of choosing a bank based on incentives only. The incentives may very well not last, then you'll be stuck with a bank that may not be the best bank for you.

This goes double for the UK, where people are so unlikely to change account later (although as I said above, I suspect that this is similar elsewhere). Once the banks have you, you're stuck – or so they think. Of course, you can change to bank which suits you better.

Leaving that aside, it's better to find the best bank for you the first time round, so be careful not to place too much emphasis on the incentives on offer. Instead, look at the other criteria as these are more likely to be benefits in the long term.

Anyway, I've said that before and the Daily Telegraph article is saying the same thing:

If you originally chose your bank because it offered a free Young Person's Railcard for a year, or some discounted cinema tickets, chances are it is not serving you well now.

To check whether you should be switching account, start by assessing your needs. Your lifestyle and the way you manage your finances determines which type of account is right for you.

Criteria For Finding The Best Bank

It goes on to offer some sound advice on what criteria to use when choosing the best bank:

If for example you usually spend your whole income and often (or always) go into your overdraft, concentrate on the overdraft interest and charges. If on the other hand you are always in credit, choose the account that offers the best credit interest and added benefits if you think you are likely to take advantage of them.

Of course, you can also take other things such as home loan rates, what credit cards they offer, customer service, location, number of ATM points, internet banking, telephone banking, what their fdic insurance coverage is like etc.

One point that the article highlights as something to be careful about in the UK is overdraft rates and charges. Some banks will punish you severely if you go over your limit. Something to watch out for! I always recommend that you don't use an overdraft facility, but there are times that you just have no option.

The article also says that the big banks came out with the worst customer service level in a recent customer satisfaction survey. That makes sense really - the smaller banks have to work harder to get customers so they often provide the best customer service.

Before you get excited and move to a small bank, you have to weigh this up with the security of being with a big bank. This is especially important in the current economic climate. You don't want to join a bank that may fold!

I can't help but point out that HSBC scored only 57%, which doesn't surprise me in the least, because I was a HSBC customer when I lived in the UK and experienced a nightmare when I tried to close my accounts and transfer the balance overseas (it took 6 months and 30-odd calls to finally do it!).

Well that's all for this post. Hopefully this has given you some hints as to what to look for when you are searching for the best bank.

Which Cities Have The Best Bank Deals and Rates?

I recently read Which Cities Have the Best Bank Deals and Rates, an article that highlights three cities in the US that have very good deals for people who are looking for a bank. While I wouldn’t recommend moving to one of these cities just to take advantage of these deals :) I thought I’d mention the article.

Here are the cities listed and a brief quote from the article (check out the full article for more):

Chicago, Illinois:

competition is fierce between smaller banks like Cole Taylor Bank, Amcore Bank, Millenium Bank, and Broadway Bank who have offered Chicagoland residents great rate deals on certificates of deposit, money market accounts, and savings accounts for years.

Oklahoma City, Oklahoma

Bank 2, AmericaNet Bank, Bank of the Wichitas, and Evantage Bank are all offering their own branded reward checking accounts with yields of over 5%.

St. Louis, Missouri

the city has over ten banks which are consistently promoting their deposit products both locally in the St. Louis metropolitan area and nationally. Triad Bank and St. Louis Bank are offering CD rates of over 3% today

If you live in one of these cities and you are looking for a bank, then you may be in luck! If you’re not, stay tuned and we’ll have some tips in future on how to choose the best bank for you.

Note, although it’s always nice to get a good deal from your bank, it’s important not to focus too much on them. Deals come and go. Often the deals in place when you join a bank don’t last. Focus on the other criteria outlined on this blog (and others) for choosing the best bank for you, as they are less likely to change.

The Best Bank - Update

It's been a while since I've been able to update The Best Bank. I've been very busy and haven't had time to update the site. To tell the truth, although I want to write more about choosing the best bank, I'm wondering if I have the time to continue this site.

The original purpose of this site was to help people answer the question "which is the best bank for me". It's a question that everyone asks at one time or other – most of us ask it several times throughout life – as our situation changes, we consider changing banks.

The Best Bank was never supposed to give you the answer – I'm not going to name the one and only bank that is the best choice for everyone. That's just not possible. Such a bank doesn't exist! What's right for one person, isn't necessarily right for the next person, because so much depends on an individual person's situation. Choosing the best bank for you is a very personal choice.

Instead, this site was supposed to help you make your own choice about which bank is best for you. The original purpose of this site was to discuss the attributes of a good bank and the issues you need to consider when choosing the best bank for the your circumstances. It was going to paint a broad picture to help you make a more informed choice.

I had a structure planned – as I said in one of the early posts, I planned to look at the following issues:

  • Account Type
  • Services Offered
  • Loans and Mortgages
  • Fees
  • Convenience / Location
  • Customer Service options
  • ATMs
  • Internet Banking
  • Account Aggregation
  • Types of financial institutions
  • Security / Stability.

I managed to look at a couple of these (account type and location for example), but haven't been able to work through the rest. Now I'm wondering if I'll be able to complete this, because it takes lot of effort to do it properly.

Anyway, for now, I'll keep the site open and post when I can, but maybe the style will change. My original intention of making the site a series of ‘reference' posts, may have to give way to a more informal style of posting, where I just cover whatever issue comes to mind – although of course it will be related to choosing the best bank.

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