Information About Your Bank

MoneyRates.com makes it easy to find the best CD rates and high interest savings accounts. Finding a great bank rate online is very useful, but there can still be some questions about banks that you might want answered. Is my bank insured? How can I research a bank to determine their financial health? What information should I consider about a bank before opening an account with them? These questions are important because the number of bank failures in the United States has increased dramatically over the last couple of years. The number of bank failures in 2010 already numbers 109, which comes after 140 banks failed in 2009. In comparison, only 25 banks failed in 2008 and only 3 banks were closed by the FDIC in 2007. Of the banks that have failed this year, 25 have been large banks with either branches in multiple states or with over $1 billion in assets. The failure of these larger banks has helped deplete the FDIC's bank insurance fund down to below $65 billion. Ultimately, Americans pay for the cost of bank failures from their federal tax payments or by paying higher fees for banking services. If your bank fails, the good news is that your bank deposit is insured up to $250,000 per depositor. And this is reassuring. The bad news, however, is that having money at a bank that is closed by the FDIC can lead to some problems. The new bank that assumes the deposits of the failed bank can lower the interest rates on your CDs, money market accounts, and savings accounts. Also, if the FDIC does not find a bank to take over for the old bank, you are stuck with the hassle of finding a new bank. Customer with online banking and online bill payment have reported trouble converting from failed banks as well. If you are one of the many who would like to research individual banks before opening up an account with them, MoneyRates.com is listing some useful resources and bank rating tips to help you in your search.

Help with Bank Ratings

The FDIC provides insurance coverage for depositors up to $250,000.00 per bank. The problem, for many, is the inconvenience and confusion for a depositor caught up in a FDIC bank failure. Consequently, it is always financially prudent to review a bank's strength and financial condition before placing a deposit at that bank. The FDIC provides an excellent tool for finding general information about a bank. If you are doing research on a bank you can also do the following:

• Check any enforcement actions by the FDIC against the bank. Historically, the chance of a bank failing is higher if the bank has had a recent enforcement action when compared to a bank with no recent enforcement action.
• Check the total assets of the bank. Smaller banks with less than $500 million in assets are more likely to be purchased or to be closed by the FDIC than larger banks.
• Check the stock price of the bank for the last six months. What is the trend? In some cases the market knows about upcoming financial problems for a bank and that can be reflected in the stock price.
• Check the % increase in total assets in recent quarters. Does it appear that the bank is growing too fast? Or are assets decreasing at an alarming rate? If either is the case, bank closure is more likely. Another consequence of a bank growing too fast or too slow is that the customer service from the bank can be poor while the bank tries to adapt to an unstable rate of growth. Look for a bank with the "Goldilocks" approach to asset growth, not too fast and yet not too slow. Not only is a bank with stable asset growth in better overall financial health, customers of these banks are usually treated better.
• Finally, for many people the task of reviewing financial data is either confusing, too time consuming, or just plain boring. There are services and companies that will sell a bank rating report that summarizes and clarifies many of the financial questions about a bank's health. In many cases the peace of mind afforded by buying a report on your bank is well worth the money spent. Veribanc and Weiss Ratings are two companies which provide bank rating reports.