The institution you choose to bank with plays an integral role in managing your finances. As a servicemember, you have several options to choose from: Banks for the military, commercial banks, credit unions, and more.
To identify which option is the best choice, you’ll need a working knowledge of the types of banks, bank accounts, and their features. Below, you'll discover the basics of military banking and how to find the right military bank for you.
What Types of Banks for Military Members Are There?
There are five basic types of financial institutions that offer personal banking services to both military personnel and civilians: commercial banks, virtual banks, credit unions, savings and loan banks, and brokerage accounts. As a current or former servicemember, however, you gain the advantage of access to some military-specific banking institutions, as well.
A standard or “retail” bank provides a wide range of services. They serve individual consumers and offer services such as checking and savings accounts, loans, credit cards, and mortgages. Some traditional banks offer specific products for military members. They may also charge higher fees but are typically considered the most convenient option because they allow you to access and withdraw funds from any ATM, even when abroad.
A virtual bank has no physical branches, and thus all transactions are accomplished online or through the mail. Virtual banks normally offer higher interest rates on savings and will be available to you no matter where you are stationed. One potential drawback is that physical check deposits must be done online or through an app and if those aren’t available to you, you may have to mail it in. Likewise, most virtual banks do not accept cash deposits and have limited services for check cashing. Additionally, there may be extra processing time required for deposits, withdrawals, and online payments.
A credit union is a not-for-profit financial institution that is owned and controlled by its members. They are known for their personal service and often offer lower fees on their products than commercial banks. Credit unions are typically smaller than banks, and are often focused on serving specific groups or communities. Members of credit unions may be required to pay a membership fee and/or maintain a minimum balance in their accounts.
Savings and Loan Banks
Savings and loan banks, also known as thrift institutions, primarily accept deposits from consumers and use those deposits to make mortgage loans. They are also smaller than commercial banks and typically focus on serving specific geographic areas or customer groups. Savings and loan banks are regulated by state or federal agencies. This is because they are required to follow certain rules and regulations, including maintaining certain levels of capital and liquidity.
The final type of banking account to consider is a brokerage account. These are offered by investment companies, normally to customers who have other types of investments under management (such as an IRA or mutual fund account). Although a brokerage account offers a higher level of convenience if other funds are invested with the brokerage company, higher minimum deposits may be required. Typically, the availability of loans is limited.
What Type of Banking Account Do I Need?
A checking account (or a share draft account at a credit union) is probably the best account option for your recurring monthly transactions. While checking accounts can earn interest, they typically earn little to no interest for accounts with small balances. Some banks may charge fees for various one-time services on top of regular monthly service fees.
A savings account is a good place to deposit funds you don’t need right away for future purchases as part of your financial plan. This type of account is also the best place to start contributing towards an emergency fund. Savings accounts may also include a money market account and/or a certificate of deposit (CD) account, which generally offer a better rate of return at lower risk, for achieving short-term and medium-term financial goals.
How Do I Choose a Bank?
It’s important to do your research on the basics of military banking in order to find the one that meets your needs the best. Look for a bank with a strong reputation and a track record of serving the military community. You should also consider the types of products and services offered, as well as the fees and terms associated with those products. Make sure to compare the rates and terms of different military banks to find the best option for you.
When choosing between the various banks for military members, it may be beneficial to look for the following features:
- Free checking and overdraft protection
- Convenient access to ATMs without additional fees
- Convenient physical branches for making face-to-face transactions
- Locations near most major military installations
- Low fees and relatively higher interest rates for deposited funds
- Availability of consumer loans, auto loans, mortgages, and credit cards
As a servicemember you may travel around the world due to Permanent Change of Station (PCS) orders or deployment. Because you will likely want to be able to access your account wherever you are, convenience and accessibility are major factors to consider. Ensure that the bank you choose has online and mobile banking services and a network of ATMs.
Thanks to the wonders of technology, the geographic location of your bank is not as high of a priority as it once was. However, many banking services — such as cash transactions, loan applications, certified money, etc. — must be accomplished in person. Most military installations have on-base banking facilities that may provide unique benefits for your military family’s banking needs, so check them out when you move to a new post.
Costs and Fees
You should also consider costs and fees when deciding on a military bank. Some accounts, such as a full-feature checking account may have a monthly fee. Many banks offer free accounts to military families if a direct deposit or minimum balance is maintained. Watch out for other hidden fees, such as check returns, insufficient funds, wire transfers, and out-of-network ATM fees. These can add up if used frequently.
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