The Five Commandments to Select the Best Bank for You
Saving starts with selecting not just the right bank but the best bank for you.
By Amr Hussein Elalfy, MBA, CFA
5/31/19 4:00 AM
Before investing, you need to start saving. After all, you cannot create wealth from your disposable income. Only when you save from your income do you accumulate enough savings that can eventually turn into wealth. Thus, it all starts with your bank. Yet, selecting not just the right bank but the best bank for you can be a bit daunting process. Throughout my life so far, I have come to deal with eight banks (two US banks and six Egyptian banks). One always remembers the first of everything, and like I always remember my first stock investment in Nike, I remember my first bank, Citibank. This was back in New York, USA. After I had started trading stocks, I came to deal with E*Trade Bank, a sister company of my online discount broker back then E*Trade. Back in Egypt, I dealt with (in alphabetical order):
AAIB or Arab African International Bank (a privately-held local bank that is 49% owned by the Central Bank of Egypt).
CIB or Commercial International Bank – Egypt (the largest private-sector bank at the time and still is).
EG Bank or Egyptian Gulf Bank (an old bank that re-positioned itself as the bank for the youth).
FAB Egypt or First Abu Dhabi Bank – Egypt (the Egypt subsidiary of UAE-based First Abu Dhabi Bank).
HSBC Bank (an Egypt subsidiary of UK-based HSBC Holdings which used to be known as the Hongkong & Shanghai Banking Corporation).
SAIB or Société Arabe Internationale de Banque (a very traditional bank at the time).
But what are the key points that one need to consider before selecting his or her bank – in my opinion, and based on experience.
(I) ATM network: Depending on your spending habits and your need for cash throughout the day and the week, you need to consider how vast you want the ATM network of your bank to be. Obviously, the more widespread the ATM network, the better for you. However, banks with large ATM networks are usually the most expensive in terms of fees. Banks with ATMs that only dispense cash and not take in deposits will be at a disadvantage. Customers may want to deposit funds to pay off an outstanding credit card debt, so a two-way ATM machine is the best option.
(II) Online banking: It’s become almost a must-have option for all banks nowadays. Not only is online banking important to keep track of your finances, but millennials will most likely only know their banks through their mobile handsets. Your bank should have a user-friendly—yet secure—online platform where you can do more than monitoring your bank accounts, such as transfer funds between your accounts or simply being able to transfer money to another customer in the same bank or even in different banks.
(III) Customer service access: Sometimes you need to talk to a person to ask certain questions, report an issue, or simply give feedback. When dialing the customer service hotline seeking help, sometimes the digital messages recorded on so-called IVR (or interactive voice recognition) are confusing and are sometimes very difficult to walk through, hence the importance of having access to a real person! Some banks offer different levels of service, e.g. premium services that are provided to customers with a minimum size of holdings. Picking banks that offer such services may be a determining factor for you.
(IV) Fees and commissions competitiveness: By comparing the cost of each bank’s services, one can determine which service is needed the most and how much it would cost to have that service provided by the bank. Then you can make up your mind as to which bank to sign up with. Services can include payroll, loans, Treasuries, letters of credit and guarantee, transfers, and credit cards.
(V) Bank’s quality and financial strength: In some countries, the central bank usually guarantees customers’ deposits in full, which is the case in Egypt. However, in the United States, the guarantee is only limited to a maximum of USD250,000 (was USD100,000 years ago), as insured by Federal Deposit Insurance Corporation (FDIC). Thus, if you had savings worth USD300,000, it would have made sense to keep USD250,000 in one bank and deposit the remaining USD50,000 in a second bank. This way, you can guarantee your funds. Back home, your deposits are all guaranteed in full by the Central Bank of Egypt.
Obviously, one can add more points to the above, but to me, these are all the points I would be considering when selecting my bank. I suggest you list all your points then give each point a priority and a weight, then check the available banks and grade each bank in terms of each point, then decide on the bank that has the most points.