Rate Shopping Should be Information Shopping

When you’re looking for a car loan, Certificate of Deposit (CD), mortgage, or any loan or interest-bearing account, don’t just rate shop. There are other factors that affect your money, too. Shop for rates AND information.

Wendy Kernan, Director of Bank Services for Town and Country Bank, has seen customers rate shop extensively, then move their money for a better rate and be disappointed.

“We see it all of the time,” she says. “When they move their money, they learn they need a savings or checking account at that bank to get the special rate, and they have to have a certain number of transactions on that account before they can get the rate. Or they find out they can’t have the interest check mailed to them, like they prefer. Or they learn the better rate, which took hours to find and more time to move their money, will not earn them that much more overall.”

It’s like buying a house. You don’t buy a house based on price alone. You ask about the inside of the house and its history. You get as much information as you can. It’s the same with banking.

• Educate yourself. Before you talk to banks, learn the questions you need to ask. “Google ‘What should I ask about getting a car loan, or getting a CD, or whatever you’re looking for,’” Kernan recommends.
• Ask about costs/fee/penalties. If you’re looking for an interest-bearing account or a CD, ask how the bank accrues the interest: is it daily, monthly, quarterly, or annually. Ask about fees – what do you have to do to withdraw from your fund and is there a cost to do it. If you’re getting a loan, find out if there are closing costs and how much they are. Learn if there are financial penalties for paying it off early. Ask if there are requirements to get the best rate, like having a checking or savings account at that bank and having a minimum number of transactions on it.
• Do the math. Figure out how much extra you will earn and if it’s worth it, figuring in how much time it will take to move the money, how much time it will take to drive to the bank if it’s farther away, if you will be required to open another account there, etc. Add fees into your calculation, recommends The Motley Fool. “This is especially true for mortgages, which can have a virtual grocery list of creditor fees that collectively reach well into thousands of dollars.”
• Consider customer service. Bankrate.com advises customers shopping for mortgages to look for “nuances” when talking to banks. “Get a sense of what kind of customer service you’ll receive, based on how smoothly the communication goes and how your lender processes loan applications.”

“Rate shop, but rate shop smartly,” Kernan says. “The rate is just the beginning of what you need to ask about.”