We all come from different countries and cultural backgrounds. We are all different and that’s what makes us unique. Banking systems are also different and we are used to bank in a certain way with a certain mindset.
In this short article I want to bust some of the myths that exist in some of the countries and I will try to do it on the example of my country. The reason why I wanted to write about this is because its very important to understand subtle differences in the banking so that you can make solid decisions in the future without any previous bias.
So lets start.
Myth #1:I need to bank with a large bank, because the small banks can go bankrupt.
For those of you who have lost their money in 90s and early 2000s I cannot blame you for thinking like that. It’s true, there were a lot of small banks that existed in Russia and Georgia and that went bankrupt and their customers lost their deposits.
Now in the US, you should not be concerned about this issue because of the FDIC – Federal Deposit Insurance Corporation. FDIC is an independent government agency that aims to maintain public confidence and stability of US financial system by providing deposit insurance, maintaining financial oversight and keeping financial institutions resolvable.
Most important for you is the part where FDIC insures the depositors up to $250,000. What that means is that all your deposits within one bank will be insured of up to $250,000.
You should know that even nowadays some banks close and even though it’s quite rare, remember FDIC is usually a designated receiver of assets and liabilities and becomes executor. In a highly unlikely event of bank failure FDIC takes responsibility and pays off the depositors. Usually FDIC pays off the customers of the insured bank within next few days after the bank is closed. As you can see you will not need to wait for months and months. Furthermore, both principal and accrued interest would be paid as long as it’s under $250,000. So the whole experience for you will be seamless.
So now that you know that FDIC takes care of you, you can open an account or CD at any bank you want, as long as it is FDIC insured. Your bank would indicate that, if not you can check the FDIC site. It also has a lot of useful information for your education.
For more information on FDIC please check their website: https://www.fdic.gov
Myth #2:I should only open a checking account for my salary at a bank where my company has account.
I need to burst your bubble. Most likely your company has business accounts at multiple banks and uses multiple services from multiple financial institutions. No one is going to tell you (depending on the size of your employer) where the company banks. But even if you knew, what would you do? Open a checking account in the same bank? Why??? You should always think about your needs first and open the account where you find it necessary.
I work at a bank. I have 2 checking accounts, 2 saving accounts, 9 credit cards, 2 loans. All from different banks. You are free in this country to make a choice that meets your needs not anybody else’s.
Myth #3: I should only take loan products from the bank where I have my account. They know my banking history and it will be easy to get a loan or credit card because of that.
Unless you bank with a tiny local bank (which I don’t know why you would do, they are limited in resources and products) this is very far from reality.
As you have realized from my article about Credit Score, your history is available to everyone, and because there is an intense competition among financial institutions don’t just assume that you are getting the best deal. Your bank would not treat you any different than other bank and you would not be given preferential rates or conditions. You will be hearing this from me very often: ALWAYS SHOP AROUND!.
Here is my experience. The bank where I work and bank turned me down for auto loan at their branch 9 years ago. I was new to the country and was obviously building my credit history and score. I assumed since I worked at that bank and was paid at that bank I thought I would get a loan. Nope. So what did I do? Called car dealership which secured a loan with no issues from another bank.
Myth #4:I need to open the account with a bank with largest number of branches so that I can access my funds through their branches or ATM with low or no fees.
Wrong again. All banks try to save their operating costs so they all try to become more dependent on self-service channels e.g. branches with versatile ATMs, online banking and apps. There are plenty of FDIC insured online only banks as well.
So, what should you do? Even if you open a checking account at the largest bank, I can give you 100% that they won’t have a branch or ATM in every single city in the US. Instead, what I would suggest is find the bank with good terms and conditions and fee free ATM disbursements or reimbursements. And of course, try to find a bank that offers high signing bonus for the checking accounts. There are a lot of banks that offer this.
Myth #5: I have an issue with the bank, I cannot resolve it. There is nothing I can do about it. I am only me and bank is the Bank. The story of David and Goliath.
Cannot be any further from truth. First things first, when you talk to bankers stay calm and polite, no matter what the issue is. They are humans you know and mistakes happen.
Here are some of the options:
- Call the bank explain your issue. If the agent does not understand or is not willing to help, ask to be transferred to their manager. Explain the situation to the manager, usually they would be more experienced and will work with you to resolve the issue.
- If steps in # 1 did not work, ask politely to escalate and file an Executive Complaint. These complaints will be dealt by special team in the bank who will do their due diligence and reach out to you with the resolution. Usually you will even keep the contact of the person working your complaint.
- If all of the above failed, send a letter to the bank. Keep the post receipts. You will need that.
- Try to go to the branch and explain your situation on the spot.
- If all of the above did not work, time to engage external agencies and file a bank complaint:
- CFPB (Consumer Finance Protection Bureau) – you can even access their site in Russian: https://www.consumerfinance.gov/
- Federal Reserve system. For more details: https://www.federalreserve.gov/faqs/credit_12666.htm
- FDIC (remember the first myth?) they will even help you determine the federal agency that is better suited for the nature of your complaint: https://www.fdic.gov/consumers/questions/consumer/complaint.html
- OCC (Office of the Comptroller of the Currency) depending on the nature of your complaint): https://www.occ.treas.gov/topics/supervision-and-examination/dispute-resolution/consumer-complaints/index-consumer-complaints.html
Hopefully it won’t get to the engagement of the external agencies and you will be able to resolve your issue. OCC has a sight created for general education on banking topics, if you want to learn more you can check: https://www.helpwithmybank.gov/index.html
Do you have another myth we can bust? Get in touch with me through the contact me page.