Stress Test for Your Bank

Five ways to evaluate how your bank is serving you in this economy.

Talk about headaches. Having to come up $75 billion in new capital is a stress test in itself for the banks deemed to be in the worst shape by the Federal Reserve. Compared with that, resolving issues you're having with your own bank seems like a walk in the park. Still, dealing with financial institutions nowadays can be a major source of irritation. Ask these questions to determine how well your bank is serving you -- and learn what to do to lower your own stress level:

Are my deposits safe?

As long as your bank is insured by the Federal Deposit Insurance Corp., your money is guaranteed -- up to $250,000 per depositor. That's the case even if you have an account with Bank of America, which tops the bad-bank list and needs to raise $34 billion in capital. Call 877-275-3342 to verify that your bank is covered by the FDIC, which is backed by the full faith and credit of the U.S. government. The $250,000 limit was scheduled to revert to the previous $100,000 limit after December 31, 2009, but Congress just passed a bill that extends it to 2013.

FDIC insurance covers checking accounts, savings accounts, money-market accounts, certificates of deposit and retirement accounts. You can insure substantially more than $250,000 if you arrange ownership of the accounts properly. Use the FDIC's Electronic Deposit Insurance estimator to figure out if the total amount of your deposits is covered.

Credit-union deposits up to $250,000 are protected by the National Credit Union Share Insurance Fund. The National Credit Union Administration, the government agency that oversees credit unions, provides a calculator to help you determine whether the funds deposited in your credit union are insured.

Are my savings earning enough interest?

The average interest rate on bank money-market deposit accounts is a paltry 0.40%. But you can earn significantly more by switching to a high-paying account with an online bank, such as Ally Bank (formerly known as GMAC Bank), in Utah. If you know you won't need your money for a while, you can earn 2.20% with a six-month certificate of deposit at Corus Bank, in Illinois, or 2.8% with a 12-month CD at Ally Bank.

Will my bank lend me money?

Most lenders have tightened their standards, but money is available if you spiff up your credit. Today you'll probably need a credit score of about 730 to qualify for the best rates on a mortgage.

If you can't come up with 20% for a down payment, you may have to pay a higher interest rate or additional closing fees. Check with your local community bank or credit union -- they're advertising their willingness to make loans and may be able to offer you a better deal than the mega-banks.

If you're applying for a loan, prepare in advance by checking your credit report. The 2009 Consumer Financial Literacy Survey by the National Foundation for Credit Counseling showed that 144 million people had not ordered a copy of their credit report in the past year.

You can order a free credit report from each of the three credit bureaus at www.annualcreditreport.com. For an additional $7.95, you can get your FICO credit score with your Equifax report. At www.myfico.com, you can see how your credit score affects your monthly payment for a home mortgage or car loan.

Am I being hit with more fees for ordinary transactions?

Financially shaky banks need to raise cash however they can. But that doesn't mean you have to pay up. Open an account at a bank with a large ATM network so that it's easy to find a convenient ATM and avoid the $4 fee you must pay whenever you use another bank's ATM. Or switch to a credit union -- such as Navy Federal Credit Union -- that participates in a surcharge-free ATM network. Online banks, such as UFBDirect.com, don't charge ATM fees and will reimburse you up to $4.50 a month for ATM charges from other banks.

Overdraft fees generated $17.5 billion in income for banks in 2007, according to the Center for Responsible Lending. You can limit your share if you link your checking account to a savings account so that the bank transfers your funds from one account to the other. You'll be charged a transfer fee (typically $5) rather than an overdraft fee ($ 25 to $27 is the median at community banks and credit unions, $33 at mega-banks).

Has the bank raised the rate on my credit card?

You're not alone. Banks that have to firm up their balance sheets are raising interest rates, lowering credit limits or canceling cards outright for customers they deem to be too risky.

If your card issuer changes the terms and conditions of your credit-card agreement, call the toll-free number on the card and ask to have the changes rescinded. If a lower credit limit means that you are using more than half of your available credit, try to pay down your balance as quickly as possible so that your credit score doesn't drop. You can reject the new terms, but closing the account will affect your credit score, especially if you have used the card for a long time.

If you decide the new rate is onerous and want to close the account, look for a low-rate balance-transfer offer at www.lowcards.com or www.billshrink.com. Most 0% balance-transfer offers come with a fee of 3% of the amount you transfer. One exception is Pulaski Bank, which has no fee for its six-month offer. The card, which carries a fixed interest rate of 6.5%, does have a $35 annual fee. But that's a small price to pay for its low interest rate.