Category Archives: Finance

How to Choose a Bank

Here’s another post based on reader request. I’ll be upfront and say that I don’t know nearly as much about banks as I do about credit cards, but I figure that it might be useful to start with what I have for myself.

I currently have three bank accounts: one credit union, one online bank, and one major national chain. I use the credit union for most all everyday banking activities, I use the online bank for free ATM withdrawals, and I don’t do anything with the national chain except accrue rewards.

My credit union is Boeing Employees Credit Union (BECU). I highly recommend credit unions because they often have lower to non-existent fees (e.g. there’s no monthly fee or minimum required balance to have no monthly fee), they can give better (if only marginally better) interest rates, and they’re not some impersonal behemoth that’s trying to squeeze fees out of you. You’re a part owner with a credit union, there are no external stockholders to appease, and I generally feel good about supporting a credit union.

I can do almost everything I need to do with my credit union (which is mostly just online banking, online bill payment, and paying other people), but credit unions often don’t have as many physical branches or a huge network of ATMs, which can be problematic when you’re traveling or if you need access to cash frequently. But most credit unions have reciprocal agreements with other credit unions, so you can use the branches or ATMs of other credit unions without fees. This benefit is great for me since I currently live in SF but BECU is based in Washington.

From my other posts, it’s clear that I use credit cards as much as possible, but for the times when I need cash, particularly when traveling, I use my Charles Schwab High Yield Investor Checking Account. I feel a little bit guilty every time I use this card at an ATM since they reimburse all ATM fees, and I know they can’t be making money on the paltry amount of money I keep sitting in that account. As far as I know, this is one of the best bank accounts for frequent travelers given that they reimburse all ATM fees, so I never have to worry about using airport ATMs that charge ridiculous fees.

Finally, I have a checking account with Chase that I don’t use. I opened it because they offered me $200 to do so. But as soon as I’ve met the 6-month requirement of keeping the account open, I’m going to close said account since I don’t think I have any real reason to keep the account open.

Thus, my recommendation would likely be to find a credit union that you like for your normal banking needs and to open a Charles Schwab account if you travel. Please let me know in the comments if you think I’ve overlooked something!

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How to Choose a Credit Card

Here are the top three things to consider when choosing a credit card:

  1. Do you pay off your credit card bill in full every month?
  2. What do you want to redeem for? Specifically, do you value aspirational travel?
  3. How much do you want to think about credit cards?

If your answer to question 1 is “No”, then stop reading and devote your time to figuring out your finances rather than choosing credit cards. The interest you’ll pay on carrying a balance on your credit card will far outweigh any rewards that you could earn from optimizing the credit card that you choose. Playing the points game only makes sense if your finances are in order and you have a high credit score.

Assuming that you pay off your credit card bill in full every month, then you can start thinking about what you want to redeem your rewards for. Do you like cash that you can spend on anything? Do you want free (or nearly free) flights and hotels? Do you value international first class flights and 5-star hotels?

The reason why many people are addicted to points and miles is because the cash cost of many “aspirational” travel products is prohibitive, but the miles or points cost is not. For example, yesterday, I booked a flight from JFK to SFO in American Airlines first class, a long stopover in SFO, and then SFO to HKG to BKK in Cathay Pacific first class for 67,500 AA miles. The cash price of this itinerary is over $9000. Would I ever pay $9k for this? Definitely not. But I was able to get most of the miles to pay for this flight through a single credit card sign up bonus.

But even if you want to redeem for travel, not everyone values international premium products sufficiently to make those redemptions rational. For example, for the same 67,500 miles, I could have redeemed for 5 domestic coach one-ways on American, or I could have gotten a roundtrip coach ticket to Europe with miles left to spare.

If you don’t want to think at all about credit cards and you just want cash back, then I recommend choosing a solid cash back card. Some candidates could be any of the ones that I myself own, the Priceline Visa (which is effectively a 2% cash back card), the Capital One Venture card (if you spend more than $6000 a year on your credit card, then it probably makes sense to get the annual fee version where you get 2 points per dollar rather than just 1), or a Fidelity Rewards Amex. These cards give you more flexibility with how you spend your rewards since they essentially all give you cash back, and 2% is a pretty solid baseline that most people won’t exceed without serious thought.

If you just want to redeem for basic travel and you’re not loyal to a single airline, I’d probably recommend the above route as well, since you’re probably not going to get more value than 2 cents per point out of an airline card. My other suggestion would be to get a credit card that earns bank points which can be transferred to a variety of travel partners. Again, either of the bank points cards that I have are good recommendations, although I’d probably recommend the Amex Premier Rewards Gold card over the Amex Platinum for most people since it earns triple points on airfare and double points on gas stations and grocery stores. For both Chase Ultimate Rewards and Amex Membership Rewards, the points can be redeemed for at least 1 cent per point, so that’s the minimum value you can get out of your points, but when transferred to airline or hotel partners, the value can potentially get much, much higher.

If you’re willing to think more about credit cards, then I definitely think it’s worth it to get a couple of credit cards to cover your bases for spend categories. For example, you could sign up for both the Chase Freedom card and the Discover It card that I’ve mentioned in previous posts. Since these are no annual fee cards, it doesn’t really hurt to keep them around, and you can potentially get a lot more cash back if you keep track of the 5% rotating categories. Or if you know that you spend a lot at restaurants or you travel a lot internationally, a card like the Chase Sapphire Preferred is solid since you get double points back at restaurants and there’s no foreign transaction fee.

Finally, if you’re willing to think a lot about credit cards or you want to redeem for aspirational travel products, then there’s not enough I can write in a single blog post to help you get there, and recommendations should be personalized given how much you spend and where exactly you want to go. Feel free to shoot me an email at efficientasianman (at) gmail (dot) com if you’re looking for specific advice.