Best Deals in Banking

A REVOLUTION is under way in the world of banking. The government is deregulating, meaning that financial institutions can compete more freely and fiercely than ever before and offer you more to get your business. The variety of their services, the size of the fees, and the amount of interest rates all these vary among financial institutions. Banks, savings and loan associations, credit unions and others are courting you. So, it cannot be repeated often enough: shop around for your best deals in banking. The neighborhood bank is probably still the best place for your checking account, but not necessarily for your savings. Passbook savings accounts are used little, except by children and senior citizens with small sums on deposit, because they don't pay as well as money market savings accounts. You sometimes can earn more at no risk by putting your money into certificates of deposit sold not by banks but by stockbrokers. And you might be able to earn more by using the mail to put your savings in an out of state institution.

In many ways, it makes sense to give all your banking business to one institution. This is called "relationship banking," and in return for it, you often can get higher interest on your savings or lower fees on your checking or better terms on a loan. That's because when all your banking business is lumped together, you usually become a fairly big customer. For example, if your balance in a money market deposit account or a NOW account exceeds $5,000, you may earn a fraction of a percentage point more interest than do customers with smaller accounts. But relationship banking does cost you something. If instead you used many different financial institutions, each for a different service, you might get still better deals.