Interest rates are really low these days, so a lot of people are trying to find the best rates on bank CDs. But is it really worth the effort? For example, if you have $25,000 and are looking for a CD, you might only be able to get a 1% interest rate after a lot of searching. If the rate is just 0.5%, you’re not missing out on much.
A 1% return on $25,000 is $250 a year, while a 0.5% return is $125. What’s important is how much time and effort it takes to get that 1% rate. If you can find it easily, go for it. But if it means spending hours running around and dealing with paperwork, it might not be worth it.
Choosing a bank shouldn’t be just about the interest rate. Service is crucial. Many banks know you have limited options for higher rates, but they want your business anyway. Make sure they compete for it by providing excellent service. If they don’t, move your account to another bank and let them know why.
Also, pay attention to fees. Don’t let a fee schedule convince you it’s okay for the bank to make money off you through high charges. Banks profit by giving you low returns and lending your money at higher rates. If you get hit with fees, ask your banker to remove them.
Convenience is key. With low-interest rates, your time is more valuable. Choose a bank that’s easy to use and meets your needs. Maybe you need one with good online access or 24/7 customer service. It’s also smart to find a bank that can handle all your accounts and services in one place to avoid dealing with multiple banks.
If you own a small business or have a mix of accounts, it’s important to find a bank that offers all the services you need. Otherwise, managing multiple banking relationships isn’t worth the hassle.
If you’re after higher interest rates and regularly move your money around, consider online banks like CIT Bank. They usually offer better rates because of lower overhead costs but don’t offer checking accounts. So, if you need a checking account too, you might want to stick with a local bank, even if the interest is lower.
In summary, think about your whole financial picture when picking a bank. Although interest rates matter, your time is more valuable right now. Look for excellent service, low fees, and convenience first. Only then should you consider the interest rates. How do you choose your bank? Is it all about the interest rates?
This guest post is by Neal Frankle, a Certified Financial Planner in Los Angeles and blogger at Wealth Pilgrim.com. He has over three decades of experience helping people make smart financial choices.