When deciding where to keep your money, it is a good idea to consider the health of your bank. There was a time, not too long ago, that it seemed as though banks were failing left and right. While the rate of bank closures has slowed, you still need to think about what it could mean if your bank were to fail. It’s true that, if your bank is protected by the FDIC, you will get your deposit back, up to certain limits. However, just getting your deposit back isn’t always enough.
Issues Associated with Bank Closures
If your bank’s health is poor, and it is at risk of closure (there are more than 700 banks on the FIDC watch list), you could run into other problems. Here are some of the headaches associated with a bank closure:
- Delays in getting your money back: In many cases, there is a bank standing by to take over operations of a failed bank. In such situations, the transition is mostly smooth. However, if there isn’t another bank in place, the FDIC will ensure that you get your money by some other means. This can take weeks in some cases, depending on the circumstances. Not ideal if you need that money quickly.
- Loss of interest: Another thing to remember is that you can’t use money to earn interest if you don’t have access to it. If you had money in a CD or some other interest bearing account, you won’t be earning anything while the account is in limbo. That’s a loss to you.
- Fees: Remember, too, that fees can be levied against you if the bank is closed. Transactions that have not cleared at the time of closing are sent back – and that could mean fees. (Not to mention the hassle of clearing up the situation and getting the money to the right place.) You might get the fees refunded, but, once again, you might have to wait for reimbursement, while fronting the money.
- Other difficulties: Direct deposits and automatic withdrawals often require some notice to change. This can result in hassles and time wasted as you try to get the situation taken care of after a bank has closed.
Due to the issues that can arise when a bank is closed, you can see why it might be a good idea to pay attention to the health of your bank. The time and interest lost as you try to deal with the hassles of a closed bank can be a real drain.
Checking the Health of Your Bank
You can double check the health of your bank by paying attention to its Texas Ratio. This is an industry standard that considers different factors. Realize that, with the Texas Ratio, the smaller the number is the healthier the bank is. A bank that has a ratio of more than 100% is considered to be at risk of failure. Look for the safest banks, and there will be less of a chance of having to deal with the difficulties and (sometimes costly) inconveniences that come with a bank failure.
This post was provided by DepositAccounts.com which offers savers a great way to check current rates on checking and savings accounts from thousands of banks.