Interest rates are really low these days, so many people are on the lookout for the best rates they can get on bank CDs. But chasing after these rates might not always be the best use of your time and effort. Here’s why: imagine you have $25,000 and you’re searching for a CD. The highest rate you might find could be around 1%, but if it’s only 0.5%, you’re not missing out on much.
A 1% return on $25,000 gives you $250 a year, while 0.5% would earn you $125. The real question is how much time and effort it takes to secure that 1% rate. If you can get it easily, go for it. But if it takes hours of running around and paperwork, it may not be worth the hassle. Does this mean you shouldn’t care about which bank you choose? Definitely not.
Service is key. Most banks know you don’t have a lot of options for higher rates, but they still want your business. Make sure they compete for it by demanding excellent service. If the staff doesn’t treat you well, move your account elsewhere and let the new bank know why you’re switching. Build a relationship with a personal banker and clearly state your expectations. Make sure they commit to providing great service and hold them accountable.
Don’t forget about fees. Don’t let a fee chart convince you that it’s okay for the bank to make money at your expense. Banks earn profits by giving you low returns and lending your money out at higher rates. If you’re charged fees, don’t accept them. Ask your personal banker to waive these fees.
Convenience is also very important. With low-interest rates, your time is more valuable than the small interest you might earn. Choose a bank that’s easy and convenient for your needs. For instance, look for a bank with a good online system. You might prefer a bank that offers round-the-clock customer service, or at least close to it. Pick a bank that meets all your banking needs.
If you run a small business or have multiple accounts like personal and savings accounts along with CDs, make sure your chosen bank offers all these services. It’s not efficient to juggle services from multiple banks. Your time is too valuable for that.
However, if you’re looking for a bank with consistently higher interest rates and often roll over your funds, consider an online bank like CIT Bank. They usually offer higher rates because of their lower operating costs. But keep in mind, they might not offer checking accounts, so you might still need a local bank for those services even if they pay less interest.
In summary, think about your complete financial picture before choosing a bank. While interest rates matter, with today’s low rates, your time is even more valuable. Prioritize excellent service, low fees, and convenience when selecting a bank. Only then should you consider the interest rates.
How do you choose your bank? Is it just about the interest rates, or do other factors come into play?
This article was written by Neal Frankle, a Certified Financial Planner in Los Angeles and a dedicated blogger at Wealth Pilgrim.com. He has been helping people make smart financial decisions for over 30 years.