HOW and WHO You Bank With Matters
Embarking on a personal finance journey is important. I've learned the hard way that a person can drastically overcomplicate things where they don't need to be (like creating a budget) and not pay attention to the complex stuff that should be paid attention to (like what investing strategy works for you and your goals).
No matter what step of the journey you're on it all starts with one thing...
Banking.
It often gets overlooked by many personal finance "gurus" that I see online and I want to take some time to talk about it's importance, how I approach banking, who I bank with, and where my money is stored.
Not All Banks Are Created Equal
Contrary to what the internet tells you...it does matter who you keep you money with. I'm not talking about banks that you and I don't have access to like the large investment banks or private equity or anything like that. I'm talking about the everyday consumer banks that has a debit/credit card in your wallet.
Those banks are not created equally and I think they can generally be split into to two simple categories: BIG or small.
Chances are you've come across big banks before in America and the largest of them are JP Morgan Chase, Wells Fargo, Bank of America, and US Bank.
Of all of the banking deposits that happen in America today around 50% of them are with these institutions. That might not sound like a lot but when you think of the dollar volume those numbers get VERY large VERY quickly.
If you're not dealing with one of the larger banks you're dealing with smaller banks. Think local credit unions, regional banks, online only savings institutions, and so on. These types of banks pride themselves on being more personable and community oriented then big banks.
Big vs. Small Banks
Whether or not you want to go with a big or small bank depends on what your needs are.
If you're looking for a bank that has every type of financial product available then you're probably going to go with a big bank. This comes with some tradeoffs though. Big banks usually have a larger footprint of buildings, more employees, bigger data centers, and whatnot that lead to them giving you absolutely insultingly low interest rates on your accounts. Seriously, if you bank with one of the larger banks check how much interest you're making. It's probably something smaller than 0.01%. Yeah you read that right.
On the other hand if you want a bank that is more personable where you'll be able to get to know the branch manager and they will know you're financial goals then you're probably looking for a credit union or regional bank. These banks often have high interest rates on their accounts, very minimal (if any) monthly service fees, and not that many financial products. As you could probably guess, this also comes with tradeoffs. Small banks don't usually have very many buildings or employees so interacting with the bank can be more challenging if you need to, the technology associated with online banking or a mobile app is often lacking, and they're best at everyday checking and savings. If you're looking to have your investments under one company, small banks aren't ideal.
In typical internet fashion, when answering the question which bank is right for me...it depends.
How I Bank
When I first started to get my finances in order I immediately liked the idea of keeping all of my financial products under one roof. I started with Wells Fargo but got caught up in that fake mortgage account scandal and will NEVER bank with them again.
Then I moved to Capital One thinking it made sense to have the same bank handle all of my everyday banking, credit cards, and investments. That didn't work out because when I did need cash or to talk to someone in person it was extremely frustrating.
From Capital One I moved to Chase and that's where I thought I had the system that worked for me.
I had a couple checking and savings accounts with them, started an investment account, and got 3 credit cards. It was this way for a while and it worked but as my life changed I realized that my banking needed to change with it.
Fast forward a couple years since I was primarily with Chase and I'm currently in a banking situation that works for me.
My primary everyday checking and savings account is with SoFi. This is for one reason and one reason only...their high-yield savings account (HYSA). Yes you have to set up direct deposit in order to get access to their HYSA but the interest rate they were giving me just couldn't be beat at the time.
I use this account for everything EXCEPT for my regularly occurring monthly bills. For that I use Boeing Employee Credit Union (BECU). The main reason for this is it's an account that I keep just enough money in to cover my monthly bills that are due between pay days and they don't have account minimums or monthly fees. Any credit union will most likely offer the same but BECU is close to me and I like their network of ATMs in the Seattle area where I live.
This system may change in the future but right now it works for me and I couldn't be happier.
Support Banks
You may not think of an investment account as a bank but it absolutely is a bank. Even accounts that you only have a credit card with are banking institutions.
Yes your Best Buy, Ulta, or Costco credit cards are with banking institutions. By law, they have to be.
To go along with my every day banking I have money and financial products with several other institutions that I'll rapid fire below. All of these accounts serve their own purpose.
- Chase Bank: 2 credit cards
- Barclays Bank: 1 credit card
- Empower: work retirement account
- Sound Credit Union: household grocery money
- Coinbase: crypto holdings
- Kestra Financial: personal retirement account
Key Takeaways
The point in writing all of this is sharing the main lesson I've learned and that is...
Not all financial products are created equally matches the sentiment of not all banks are created equally.
50 years ago it was difficult and took time to move money from one institution to another but in today's world it takes a couple business days and you never need to get off the couch and put pants on. It can all be done from your couch.
If you're looking for an investment account, don't be afraid to open an account outside of your everyday banking that focuses on investing. Chances are you'll get more returns from a focused account.
If you're looking for the best travel rewards credit card, you'll probably be better off getting a Chase Sapphire or American Express card no matter who you bank with.
At the end of the day find what works for you and keep achieving those goals!
Cheers
Max
PS. Not sure where to begin with finances? The first step is creating a budget. Need help? Don't worry I got you.
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