You may find out a bank or credit union pays a high savings APY or offers a sign-up bonus, but you don’t know whether you can trust your money with a company you know nothing about.
The most important question is whether the institution is federally insured; insurance guarantees your money is safe should the institution fold.
A bank should be insured by the FDIC, and a credit union should be insured by the NCUA.
You can also check customer reviews to see whether you feel comfortable banking with the institution.
See Business Insider’s picks for the best online banks »
When it comes to opening a bank account, many people lean toward a company they’ve heard of before. Maybe you trust the bank your parents have used since you were a little kid, or you feel confident in big names like American Express and Chase.
So what do you do when you find out a bank or credit union pays high interest rates or offers a cash sign-up bonus — but you’ve never heard of the institution before?
There are a few simple ways to make sure the company is safe and to figure out whether you’ll like banking there.
Federal insurance is the most important thing
The No. 1 sign an institution is legitimate is that it’s federally insured.
As long as an institution is insured, your money is safe should the company shut down. Individual accounts are legally insured up to $250,000, and joint accounts are insured up to $500,000.
If it’s a bank, you should see the words “Member FDIC” on the website. This means the bank is insured by Federal Deposit Insurance Corporation, or FDIC.
A credit union should be insured by the National Credit Union Administration, so you’ll see the words “Federally Insured by the NCUA” on the website.
You can also check a company’s insurance status on the FDIC and NCUA websites.
You may be looking at a platform that offers accounts but isn’t technically a bank, such as Wealthfront or Betterment. These companies often have benefits you can’t find with traditional banks or credit union, such as budgeting tools, auto-investing options, and financial planners.
These types of banking platforms aren’t federally insured, but they should be powered by banks that are. You should see notes about insurance on the website, and the site will name the partner banks.
Related Product Module: Related ProductFind out whether you’ll be happy banking with the institution
You’ve determined the bank/credit union has federal insurance. Now the question is, are you going to be happy you chose to keep your money with this company?
Read user reviews online (Personal Finance Insider has many!), and if an easy-to-use mobile app is important to you, check reviews and ratings in the Apple and Google Play stores.
You may be looking at a bank or credit union because you found out it …read more
Source:: Business Insider