In my last post I mentioned that rewards checking accounts can be used as a ploy by failing or hurting banks.
So, how do you tell if your bank is hurting for deposits and customers? How can you avoid being sucked into a failing bank?
Check a Bank’s Health
There are two very easy ways that I have found to check the pulse of a bank. I hope you’ll find this information useful as you search out better banking deals for you and your family.
Bankrate’s Bank Safe & Sound Ratings
For starters, bankrate.com is a great resource. You can use it for looking at national mortgage rate averages, calculators for figuring how much interest your CD will earn you, and calculating how quickly you can pay off your credit card debt.
Another great resource on the site is Bank Safe & Sound Ratings. You can read all about the methodology behind the ratings on the site so I won’t go into that.
I want you to use it.
And it is really simple.
You can search by star rating, but that won’t work if you are trying to look at the rating for a bank with a specific rewards checking account offer.
1. Pick whether the institution you are researching is a bank/thrift or a credit union.
2. Type in the name, or part of the name, into the search box.
Your targeted bank should pop up in the results with location information so you know you’ve got the right bank. There is a lot information you can look at under Memo and Statement. The first thing to look at is the star rating. If you’re looking at a 4 or 5-star institution, stop worrying. You can still read the memo and the financial statement, but you’re dealing with a quality institution.
Any stars lower than that warrant investigation.
I’m not saying you shouldn’t bank with a 2 or 3-star bank. Not at all. (In fact, the bank we are currently using is 2-star. More on that in a little bit.)
But you should look into everything further to look for any glaring issues.
Oh, and all of this information is free thanks to Bankrate.
Bauer Financial’s Rating
Another great resource is Bauer Financial’s research into banks and credit unions. Now, Bauer wants to charge you for the full reports so this information is significantly less useful than Bankrate. It might be more thorough. I don’t know as I haven’t bought a copy of a report.
What I’ve use Bauer for is to do a star rating search. They’ll still show you the star rating, and offer to sell you the full report. (Our bank is a 3-star with this system. That makes me feel a bit better!)
Protect Yourself from Your Bank
Let’s say your bank isn’t rated that well. What should you do?
This post was featured in the Carnival of Personal Finance.