Should You Put Your Money in a Bank You’ve Never Heard Of?
Written by
Nicole Spector
Edited by
Amber Barkley
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The U.S. is a nation brimming with banks — well over 4,000, in fact. Chances are good you’ve heard of the largest legacy institutions, such as Chase and Bank of America, but what about all these others? Particularly newer, smaller banks?
As you’re researching the best bank services for your finances, you may be coming across quite a lot of institutions you’re wholly unfamiliar with, and this prompts the question: Should you put your money in a bank you’ve never heard of?
This is a really important question, particularly with all these banks popping up seemingly out of nowhere.
“When it comes to safeguarding and growing your finances, the choice of the right bank is essential,” said Paul de Langen of Wealth Winder.
The good news: being a customer to a bank that is totally new to you can be a great idea. But you have to go about it in a rigorously vigilant way. Here’s what to consider.
You Could Get Higher Interest Rates and Lower Fees
One of the biggest perks of newer and/or smaller banks is that they often boast competitively higher interest rates on savings accounts and CDs.
These more low profile banks, de Langen noted, also often tout lower fees on checking accounts “as a way to attract customers from more established competitors. This can be a good reason to switch if you’re looking to maximize your savings or minimize costs.”
You Could Get Innovative Services and Technology
It’s a digital and mobile world, and a lot of newer, smaller banks are fully equipped to deliver in that department — at times more so than bigger, more famous banks.
“Some lesser-known banks, especially those operating primarily online, may offer more innovative banking technologies or user-friendly platforms,” de Langen said. “These can include more intuitive mobile apps, easier international transactions or novel financial products.”
You Could Get Better Customer Service
“Smaller banks or newer institutions might provide more personalized customer service compared to larger, more impersonal banks,” de Langen said. “The level of attention and care might be significantly higher, offering a better banking experience.”
Pay Attention to Security and Stability
Though there are often very appealing aspects of banking with a new bank on the block, there are concerns to address.
“The biggest concern with lesser-known banks is the security of your deposits and the overall stability of the institution,” de Langen said. “Established banks have a long track record and are perceived as more stable, which can offer peace of mind.”
Consider Accessibility and Convenience
Smaller, newer banks likely do not have as wide a presence as larger banks with a mighty brick-and mortar presence. This will likely make it harder to get things done in person.
“Consider the convenience of access to your funds,” de Langen said. “Smaller or online-only banks might have limited ATM networks or physical branches, which could be a drawback for some customers.”
Evaluate the Digital Experience
Just because a bank focuses on digital experiences, doesn’t mean it’s up to par for your needs. Get a feel for how its mobile and online operations work.
“If the bank operates primarily online, evaluate the user experience of its website and mobile app,” de Langen said. “A seamless, secure digital banking experience is crucial for managing your finances effectively.”
Research the Bank’s Background
Before setting up service with any bank, no matter how familiar you are with it, you should look into the bank’s history and financial health, and scour reviews from other customers.
“This can provide insight into the bank’s stability, customer service quality and any potential issues you should be aware of,” de Langen said.
Make Sure the Bank Is FDIC-Insured
When scoping out new — or just new-to-you — banks, make sure the bank is FDIC-insured. This will protect your funds up to $250,000.
“Generally, you should search for the words ‘Member FDIC’ on their website,” said Liran Eliner, Ph.D., CEO of Cache. “If you want even more peace of mind, you can look up the name of the bank on the FDIC’s website to make sure that the funds are FDIC-insured.”
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