Investing All-in-One For Dummies. Eric Tyson

at traditional brick-and-mortar banks in your local community, you may be able to get better terms and deals if you ask. Here’s a common example.

      Suppose that for several years, you’ve had a checking account at your local bank and have not had any real issues or problems. Then one month, you end up bouncing several check payments (say, four at $30 each) because a deposit into your account didn’t clear in time. You may very well be able to get some or even all of these fees waived by pleading your case to the local branch manager. Explain how long you’ve been a good customer and why this was a one-time case of bad luck, something beyond your control, and so on. The worst that can happen is that the manager will turn down your request, and you’ll have wasted a few minutes of your day. More likely, however, is that you may save yourself $90 to $120 for a small amount of your time.

      Deposit account terms and loan terms are harder to negotiate, but some folks have had some success even in those arenas. Your regular bank may offer better mortgage terms if it knows it needs to match or beat a more competitive offer from another bank you’ve shopped, for example.

Feeling Secure with Your Bank

      Putting your money in a bank may make you feel safe for a variety of reasons. For your parents and your grandparents, the first investing experience was likely at the neighborhood bank where they established checking and savings accounts.

      Part of your comfort in keeping your money in a bank may stem from the fact that the bank is where your well-intentioned mom and dad may have first steered you financially. Also, at a local branch, often within a short distance of your home or office, you find vaults and security-monitoring cameras to protect your deposits.

      Bank branches cost a lot of money to operate. Guess where that money comes from? From bank depositors and the customers of the banks’ various services, of course! These operating costs are one of the reasons why the interest rates that banks pay often pale in comparison to some of the similarly secure alternatives discussed later in this chapter. This also explains why an online bank may be your best choice if you want to keep some of your money in a bank.

      Evaluating any bank

      Most folks know to look for a bank that participates in the U.S.-government-operated FDIC program. Otherwise, if the bank fails, your money on deposit isn’t protected. FDIC covers your deposits up to a cool $250,000.

      

Some online banks are able to offer higher interest rates because they are based overseas and, therefore, are not participating in the FDIC program. (Banks must pay insurance premiums into the FDIC fund, which adds, of course, to a bank’s costs.) Another risk for you is that noncovered banks may take excessive risks with their business to be able to pay depositors higher interest rates.

      When considering doing business with an online bank or a smaller bank you’ve not heard of, you should be especially careful to ensure that the bank is covered under FDIC. Don’t simply accept the bank’s word for it or the display of the FDIC logo in its offices or on its website.

Check the FDIC’s website database of FDIC-insured institutions to see whether the bank you’re considering doing business with is covered. Search by going to the FDIC’s Bank Find page (banks.data.fdic.gov/bankfind-suite/bankfind). You can search by the name, city, state, or zip code of the bank. For insured banks, you can see the date when it became insured, its insurance certificate number, the main office location for the bank (and branches), its primary government regulator, and other links to detailed information about the bank. In the event that your bank doesn’t appear on the FDIC list, yet the bank claims FDIC coverage, contact the FDIC at [phone].

      In addition to ensuring that a bank is covered by the FDIC, investigate the following:

       What is the bank’s reputation for its services? This may not be easy to discern, but at a minimum, you should conduct an internet search of the bank’s name along with the word “complaints” or “problems” and examine the results.

       How accessible are customer-service people at the bank? Is a phone number provided on the bank’s website? How hard is it to reach a live person, the local branch, and its personnel (including the manager)? Are the customer-service representatives you reach knowledgeable and service-oriented?

       What are the process and options for getting your money out? This issue is a good one to discuss with the bank’s customer-service people.

       What fees are charged for particular services? This information should be posted on the bank’s website in a section called something like Account Terms or Disclosures. Also, request and inspect the bank’s Truth in Savings Disclosure, which answers relevant account questions in a standardized format. Figure 4-1 is an example of an online bank’s disclosure for savings accounts.

      Protecting yourself when banking online

      The attractions of banking online are pretty obvious. For starters, it can be enormously convenient, as you bank when you want on your computer or smartphone. You don’t have to find a local bank branch during their limited open hours. And thanks to their lower overhead, the best online banks are able to offer competitive interest rates and account terms to their customers.

      You probably know from experience that conducting any type of transaction online is safe as long as you use some common sense and know who you’re doing business with before you go forward. That said, others who’ve gone before you have gotten ripped off, and you do need to protect yourself.

      © John Wiley & Sons, Inc.

      FIGURE 4-1: A sample Truth in Savings Disclosure statement from an online bank.

Take the following steps to protect yourself and your identity when conducting business online:

       Never access your bank accounts from a shared computer or on a shared network, such as the free access networks offered in hotel rooms and in other public or business facilities.

       Use two-factor authentication to minimize the chances that anyone other than you can access your account(s).

       Be aware of missed statements, which could indicate that your account has been taken over.

       Report unauthorized transactions to your bank or credit card company as soon as possible; otherwise, your bank may not stand behind the loss of funds.

       Use a complicated and unique password (including letters and numbers) for your online bank account.

       Log out immediately after completing your transactions on financial websites.

Exploring Alternatives to Bank Accounts

      If you’ve been reading since the beginning of this chapter, you know that the best banks that are focused online should have a cost advantage over their peers that have branch locations. Well, there are other financial companies that have similar, and in some cases even better, cost advantages (which translates into better deals for you): credit unions, discount and online brokerage firms, and mutual fund companies.

      Credit