How do I check to see if a bank's legit?

Factual Questions
1

Hmmm, that sounds bad. I was referred to by a bank and it’s intriguing in some of it’s offers (not anything illegal-sounding, just some good rates, etc.). It’s in another state, but appears to conduct 99% of its business through the internet.

How do I check to see if it’s a decent bank? They’ve got quotes from WSJ and Barrons and everyone else on their site, but of course, they’re snipped to hell. They are a member of the FDIC (at least according to their site), so I suppose that’s good.

Do I just check to see if they’ve got any BBB complaints? Are there industry rankings or somewhere? Should I really even care?

To be sure, I’ve been doing a lot of research into finances recently, but I’ve always chosen a bank based on if it’s close to my house or place of employment…

2

For openers, how 'bout just telling us which bank it is?

If it’s presidential.com, I can vouch for it personally, having done business there for several years, and the deals are good (they’re currently paying 2.75% on checking accounts, for example, compared to the <1% that most banks are currently offering).

If it’s some other Internet bank, there’s a fair chance that some other Doper knows something about it.

3

If you want to check on a bank’s FDIC insurance, the FDIC website has a search page where you can check it out.

If the bank is insured by the FDIC, your money’s safe (up to $100k), so how “good” the bank is doesn’t make much difference in that respect.

As much as I like using an Internet bank, there are some downsides. If you frequently hit an ATM for cash, you’ll probably have to pay fees to whomever owns the ATM you’re using - your Internet bank probably won’t have any ATMs of its own, or if it does, it’ll only have a few in its home territory (Presidential, for example, has only a handful in MD and NoVA, one within walking distance of my house, thankfully).

If the online bank doesn’t have any ATMs or branches near you, there is literally no way to deposit cash into the account. You can have your paychecks electronically deposited, and you can mail in any other checks you get, but if someone gives you a fist full of c-notes, you’ll have to sell them to a friend (who will deposit them in his account, and pay you for them with his own check, which you will then mail to your online bank).

It can also be difficult or impossible to get a cashier’s check or certified check if there’s no branch office near you.

The upsides include very good rates, free billpayer service (from Presidential, at least), and good, reliable electronic access to everything.

One possible approach: maintain two checking accounts. Keep the bulk of your vast fortune in the online bank, for the rates, and keep the bare minimum in a local bank, to preserve access to a free ATM, to let you deposit cash, etc. Then, just write yourself the occasional check to move money from one account to the other.

4

I use a Norwegian Internet bank (because I live here obviously), and when I need to deposit some cash into my account I just go to another bank and pay them $5 or so to transfer it.

I very seldom have to do this, as I don’t really withdraw much cash. I just pay everything I buy with a debit card. Sometimes I’ll need to withdraw some money, usually less than $50. I just keep it on me until it is spent. No problem.

5

That might be a problem here. If you wander into a U.S. bank and ask them to do something for you, anything at all, their first question is, “Do you have an account with us?” If your answer is “No,” that’s usually the end of the conversation.

It works for me, for much the same reason. I almost never use cash for anything. I’ve had the same twenty-dollars bills in my wallet for months.

6

I have had accounts with both E*Trade Bank and ING Direct (the Orange Savings account you may have seen advertised). Both were similar to the experiences previously mentioned, i.e. great rates, but a little bit of a pain to deal with on a day to day basis. The whole ‘two accounts write yourself a check’ system seems to work pretty well though.

Also, check out http://www.bankrate.com and you can search for the best rate on this sort of thing… it is NOT a non-profit though, which makes me wonder a little bit about how trustworthy the results are.

7

Yeah, that’s what I was thinking. I’ve just been researching various financial opporunities (Money Market, foreign currency accounts, cash-only treasury funds, etc.) and I seem to find that the ratio of trustworthy to untrustworthy places is so skewed that I wondered if I shouldn’t just give up. This place has come highly recommended, but I called their customer service dept. to ask some questions and the answers I got were disenhartening. I was just wondering if there was a way to find out the solvency, etc. of the institution in quesion.

Thanks for the advice everyone.

8

This puzzles me. As long as they’re FDIC insured, their solvency simply shouldn’t concern you. It can’t have any effect on your money. If they actually went under (and I’m hard-pressed to remember the last time a bank failed, at least not since the S&L fiasco of the 1980s), the FDIC has you covered. So why would you care about the bank’s solvency? That’s what the FDIC worries about, and pays a great deal of attention to.

I’m also mystified by what you mean by “trustworthy” in this context. What is it you think is going to happen? You’re going to send them your money, and they’re going to disappear in the night? Fly-by-night banks don’t get insured by the FDIC (and, therefore, don’t really exist).

As far as customer service goes, I actually can’t tell you how good or bad my bank is, since I’ve literally never had occasion to call them. My direct deposits go in, my electronic payments and bill payer checks go out, and I get my 2.75% interest every month (back in 2000, they were paying 6% - oh, how I miss those days!).

Banking is a heavily-regulated industry. It’s not like choosing a mechanic for your car, or someone to paint your house. You look for the place with the best combination of interest rates and freebies, and go with them.

9

I wrote the OP after an extended bout of sleeplessness and didn’t consider my words correctly. This bank has been the subject of a lot of press (well, I’ve come across some literature on it) as well as being mentioned in a series of “referrals” from some places that I don’t consider particularly reliable (i.e. investment newsletters that routinely disappear and pop up as their writers go into and get released from jail). An associate of mine was thinkng of opening an account and tried to get me interested as well. I took a look around and was wasn’t impressed by their web site (which has since been remade), but was wondering what other research I could do into this (hence the thread). I agree with you that a bank would probably be the least “untrustworthy” investment I’d ever make, but I’ve heard some pretty scary horror stories (to be sure, none involved banks).

As for banks failing, I understand that the FDIC pulls the plug on banks all the time, or at least it’s not terribly uncommon. I recall an article from not too long ago about a couple of banks in my area, one of which was being closed due to no business (their closing may not have been due to the FDIC) and another that got some strongly worded correspondence from the FDIC regarding fixing their practices or losing their insurance. I’ll dig around for the article but I suppose it is possible that I misread it.

10

I used to be a pretty solid supporter of Netbank, it was a great setup at first. Interest and no fees, free billpay, were new things when I hooked up with them, most other banks charged for stuff that was free with netbank. Over the last couple years they have become irritating. Interest rates fell by like 60%. They also seem to want things notarized all the time and part of why I was using them was the convenience. Needing to go pay someone $15 2-3 times and you start to thing an account fee at your local chain bank down the street is not all that bad.

I’m sure part of it was that their lack of personal contact with the customer to create accounts makes a huge opportunity for fraud and create issues for them.

11

I’ll say that’s pretty irritating!

12

Be on the lookout for these indicators:

Top Ten Signs Your Bank is Failing

  1. Free handful of Chee-tos with every new account.

  2. They hand out calendars one month at a time.

  3. The security guard offers to walk you back to your office for five bucks.

  4. You overhear branch manager muttering to himself, “I wonder if you can eat squirrel?”

  5. Free giveaway toaster is made by G.E.

  6. Automatic teller machine replaced by fat guy with open carton of twenties.

  7. You glimpse inside the vault and notice it’s stacked with empty soda bottles.

  8. When you deposit cash, a bank officer runs over, sticks it in his pocket and dances around yelling, “Lordy, lordy! We’re having biscuits tonight!”

  9. You recognize some of the tellers as carnival people.

  10. They can’t change a twenty.

Source: An Altogether New Book of Top Ten Lists, David Letterman and the “Late Night with David Letterman” Writers, Pocket Books, 1991

13

Hello, and greetings Mr. Pow.
My thread reading is understood to be that you are in search of a satisfactory banking facility to manage your needs for banking. I am the sole legal representative of the recently died Wholotta Hooey, who as of this writing is still dead. Prior to his passing away, he was heir to the throne of YoMama, and as such has large amounts of currency current. Dewey Hooey, Looie Hooey, Hughey Hooey, and Patooie Hooie are desirous and wishing to have the family instrument removed from YoMama, for which they will pay a nice price to an appropriate person. Transposition of your banking account, address, blood type, gender preference, and favourite colour will permit me to move the funds out of YoMama and into DancesWithCatsBank, for which we will remit to you a hefty percentage of the remaining funds, after funds and percentages are incalculable. Many thankings for this opportunity to help ourselves to the contents of your pants, we are obsequiously awaiting your transfusion of data.

DWCB Solicitor,
Byatt Mi

14

While I don’t recall any big-name bank failures either, smaller banks can and do fail. See the FDIC’s website–four banks have gone under this year in the US.

15

Sorry; read that as “have gone under or been bought out.” Only one of those four required an FDIC payout.

16

I have a checking/savings acct. with the bricks and mortar bank that I’ve had for years, but since I now live over 500 miles away I conduct all my business with them online. I too use my debit card for most things, but I’ve never had a problem going into a local bank with my debit card and getting cash, which is free and the way I do it if I forget to get cash when I buy groceries.

I also have a savings account with ING and if I need some real money I just request a transfer to my regular checking account. It takes 2-3 days. You have to set up the account for the money to be transferred to ahead of time. It’s free of course.

Recently, my old bank started offering cash transfers to any bank account. I can now move money to my son who is in college and to my ex-daughter in law, who is always having money problems, with a couple of clicks.

I now write about 2 paper checks a year; the town won’t take a debit/credit card for taxes or car registration. Can you believe that?

17

I’m in Canada, so for you folks south of the border YMMV, but I’ve had no difficulties at all with ING Direct. As another respondent said, you specify a conventional bank account that your ING account is tied to, and then you just do your transfers electronically (I always use my computer, but you can do it by phone). It takes a couple of days for money to be transferred into my conventional bank account, and money transferred into my ING account gets frozen for a week, but given how I bank I don’t consider either of those to be an inconvenience.