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Shopping for interest rates? Keep this important advice in mind.

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Shopping for interest rates? Keep this important advice in mind.

The Federal Reserve cut interest rates three times in 2019, and Pinnacle’s senior economist believes another cut is likely in the first quarter of 2020. That’s not just dry economic news. These cuts have real, tangible effects on your personal and business finances. For one, you can expect a lot more bank flyers and postcards in your mailbox offering cash bonuses for your deposits.

Sooner or later, you might start to wonder if one of them is worth taking. Everyone has their own threshold for pulling up stakes and moving their money to a new bank, but interest rates shouldn’t be your only deciding factor. It might be what catches your attention first, but making the switch comes with a lot more than a new rate.

It’s a big decision, so before you weigh your options, make sure you have the right mindset. Is it about the rate? Or the bank behind the rate?

Rate Shopping
A rate shopper hunts down the latest interest rates looking for an extra tenth or quarter of a percent – whatever they can get for their savings. Some even split them between multiple banks, opening CDs at one bank, money markets at another and maybe even keeping their checking at a third.

It takes a lot of work, and after a while it can start to feel like you’re a coupon clipper going from store to store to save 20 cents on bottles of shampoo. At that point, is it really worth the trouble?

And when it comes to rates, the number isn’t the only thing to look at. Check out the terms. How long will it last? When it expires, will you have to start the process all over again?

Maybe most importantly, find out how the bank will notify you of any future rate changes. At some banks, you might not get much notice other than the terms you agree to when you open the account. Others might send you a form letter. Depending on how much you have and how deep your relationship with the bank goes, some might call you personally to talk it over.

Finding the Right Bank
The alternative is to look at what else you’re getting from a bank beyond the rate. Look at their features and value proposition and decide if it’s worth giving up an extra fraction of a percentage point.

That doesn’t mean the rate’s not important. It absolutely is. But here’s what else you should look for.

  • Capabilities
    Most banks offer similar products and services, and even rates aren’t all that different. So take a look at how you’ll access them, like with online and mobile banking, ATM policies and any other features you’ll need. Look past the immediate need and toward any future goals you might have. For example, mortgages might not vary that much from bank to bank, but their application processes and servicing will. Which one suits you best?

  • Service
    For a lot of people, great service is priceless, the differentiator that outweighs everything else. How important is that to you? Will you have a person to call or an automated phone system instead? This is where recommendations from your trusted friends and family can be very valuable.

  • Unity
    Splitting up your savings might earn you a few extra dollars, but it also makes your life more complicated. Take a close look at the bank where you keep your checking or business loans. Having all your accounts and services at one bank gives you one point of contact for everything you need and allows that person to give you better service and advice.

Ease of Doing Business
This is the sum total of everything else we’ve covered. If a bank doesn’t make it easy for you to do your daily business, almost nothing else can make up that deficit. Whether you’re working online, on the phone or in an office, your bank should bend over backward to make things simple and frustration-free. You can get a pretty good idea of what it will be like by calling their 1-800 number or surveying their digital capabilities. And if you really want to dig deeply, visit an office to ask for more information. How you’re treated – and how you see other people being treated – should tell you everything you need to know.

 

Blair Miller is an area manager for Pinnacle Financial Partners based at the firm’s McBee office in Greenville, SC. He can be reached by phone at 864.312.4116 and by email at [email protected].

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