You have seen the different types of regulated financial institutions and their functions. Now let's see if you can identify and evaluate the services provided by these financial institutions in order to determine which financial service provider is right for you.
Let's say Roman is looking to open a new savings account with either a bank or some other financial institution. He is currently looking at different financial service providers to decide which will offer him with the best options for his money. Unfortunately for Roman, he has no idea what to look for when deciding on which financial service provider he should use. He does not know if he should choose a bank that offers him low interest rates but many benefits, or an institution that is offering him a higher interest rate but with little to no benefits. So, what are the criteria to use when evaluating financial service providers?
When trying to determine which financial service provider to use, you must first determine the features and services that are most important to you. For example, do you prefer a higher interest rate? If so, that should be the number one option to look at. However, there are numerous other criteria to consider when evaluating financial service providers.
Criteria to keep in mind when evaluating financial service providers are listed below. Click each row to learn more about the service.
The interest rate will always matter when choosing the services of a financial provider. When investing and/or depositing money into a financial institution, you should always look for high interest rates; however, when taking out a loan or a mortgage, a lower interest rate is preferred.
Some financial service providers offer benefits to their customers—some more enticing than others. For example, a bank may allow you to accidently incur an overdraft of your account without any penalties or fees; while another bank may charge penalties for incurring an overdraft but will allow you to make as many transactions as you want without additional fees.
Before selecting a financial service provider, research that provider to make sure they are legitimate and not a scam. Your research can also help to determine whether the provider has had a good or bad history with their customers.
One important consideration—especially today—is technology. Find out if the financial service provider offers an app for quick and easy transactions, if they have a website, and if they are up to date with the appropriate technology for the financial services they provide.
The cost or price of services also matters. Some providers will offer their services at a lower rate than others.
Does the location of the financial service provider matter? Will you be going there often—monthly, bi-monthly, semiannually?
If you plan to do some investing, and you need to see one or more financial advisors, a location close to your home will be a better choice than one that is miles away.
Now, depending on a customer's preference, the criteria for choosing a financial service provider may be weighted differently. For example, one person might consider the cost of a financial service more important than the interest rate or the benefits. If that cost is significantly lower than other financial services, this may outweigh the higher interest rate or low-to-no benefits that are associated with it.
Question
No matter what, when should a customer choose higher interest rates instead of lower interest rates?
If a customer is investing money, they should always choose higher interest rates over lower interest rates.
