Shopping Around for Financial Products
When it comes to choosing financial products—such as credit cards, auto loans or mortgages—most Americans either do not comparison shop or conduct only limited searches for the best prices or terms. For example, according to the FINRA Investor Education Foundation’s National Survey, nearly two-thirds of all credit card holders reported that they did not compare offers to find the best rates or conditions.
Neutral online sites- You can compare a variety of financial products by visiting Web sites that aggregate information from a broad array of financial product and service providers. For example, Bankrate.com allows consumers to compare yields and fees for savings and term-deposit accounts, terms and costs for insurance policies and interest rates, fees and terms for credit cards, auto loans, personal loans and mortgages.
Money-related publications- Independent product-rating organizations such as Consumer Reports, consumer advocacy groups such as the Better Business Bureau and personal finance magazines frequently publish comparisons and ratings for a wide range of financial products and providers, from credit cards to home and auto insurance to health and retirement plans.
Local newpapers- Check the business or personal finance section of your local newspaper for rates and fees on common consumer financial products.
Other product providers- There’s no harm in checking out the competition directly by requesting fee tables or term sheets from other financial institutions that offer the product or service you want.
Offering materials- This includes term sheets for mortgages and other loans, the terms and conditions circular for credit cards and deposit accounts and the disclosure documents for investments and other financial products (such as a prospectus or offering statement for a bond or a mutual fund prospectus).
What are the conditions? For a savings or investment product, consider how long your money will be tied up. Is there an early withdrawal or cancellation fee? For a loan or mortgage, are there penalties for early payment?
Can I change my mind? Some products allow a “free-look” period or a cooling-off period in which you can cancel a contract without penalty.
What return will I get? For any savings or investment product, be sure to find out what return you will get and how that return is calculated. If your return is based on the market performance of a benchmark, what is the benchmark? And are there any limits or caps on the return you will receive?
What are the risks? Every investment carries some level of risk. And every guarantee is only as strong as the entity that makes a promise to return your principal or to pay your policy. Be sure to consider risk when thinking about savings, investments and insurance.
What are the tax consequences? For example, taxpayers can often deduct the interest payments they make on home mortgages and some student loans. Other products, including savings products and investments, can result in your earning taxable income.
For more details or other helpful tips visit the FINRA Investor Education Foundation website by clicking here.