The Rating Process for Banks: Selecting and Scoring

 The Rating Process for Banks: Selecting and Scoring

The assessment of banks involves two distinct steps: selecting and scoring.

Selecting Banks for Rating Consideration

U.S. News conducts surveys, ratings, and reviews for a wide range of financial institutions. This includes the largest 40 consumer banks in the country based on asset size, along with additional banks and credit unions identified through internet search volume and their significance in the broader financial industry. Some of these banks may have established relationships with U.S. News.

Scoring Bank Accounts

Bank accounts are scored based on various factors, with a focus on identifying those that receive the highest overall scores. Each account type is evaluated based on specific criteria deemed most relevant to consumers by the U.S. News editorial team.

To determine the best account in each category, the U.S. News editorial team reviews the top-scoring accounts while considering factors and account features that may extend beyond the traditional methodology.

Here are the scoring factors for each category, listed alphabetically:

Best Checking Account:

– Annual Percentage Yield

– ATM Availability

– ATM Fee Reimbursement

– Customer Complaints

– Minimum Initial Deposit Requirement

– Monthly Fee

– Overdraft Charges

Best Savings Account:

– Annual Percentage Yield

– Customer Complaints

– Minimum Balance Required to Earn Interest

– Minimum Initial Deposit Requirement

– Monthly Fee

– Transaction Limitations

Best CD Account:

– Annual Percentage Yield

– Customer Complaints

– Minimum Initial Deposit Requirement

About the Scoring Factors

Annual Percentage Yield:

– Reflects the interest earned on the money kept in an account for one year, incorporating compound interest into the calculation.

– Importance: The higher the APY, the greater the earnings.

– Scoring: Higher APY results in a higher score.

ATM Availability:

– Measures the accessibility of ATMs for depositing and withdrawing money.

– Importance: Convenience is paramount, ensuring easy access to ATMs without incurring fees.

– Scoring: A larger overall ATM network translates to a higher score.

ATM Fee Reimbursement:

– Addresses reimbursement for out-of-network ATM fees.

– Importance: Avoiding ATM fees is crucial, with higher reimbursement amounts and allowances preferred.

– Scoring: Scores are based on the dollar amount and frequency of reimbursement.

Customer Complaints:

– Tracks complaints received by the Consumer Financial Protection Bureau per bank and account category.

– Importance: A high volume of complaints may indicate inadequate service.

– Scoring: Complaints relative to the bank’s asset size are considered.

Minimum Initial Deposit Requirement:

– Specifies the minimum amount required to open an account.

– Importance: Lower requirements offer greater accessibility and flexibility.

– Scoring: Lower minimums result in higher scores.

Monthly Fee:

– Examines fees associated with account usage.

– Importance: Excessive fees diminish account value, while fee-free options are preferred.

– Scoring: Fee-free accounts score highest; otherwise, easy fee avoidance methods enhance scores.

Minimum Balance Required to Earn Interest:

– Indicates the minimum balance needed to start earning interest.

– Importance: Higher minimums may disadvantage those with limited funds.

– Scoring: Accounts with no minimum balance requirement score highest.

Overdraft Charges:

– Addresses fees incurred for overdrafts.

– Importance: Additional fees exacerbate financial strain for account holders.

– Scoring: The absence of overdraft fees results in higher scores; otherwise, capped or waived fees enhance scores.

Transaction Limitations:

– Specifies restrictions on the number of monthly withdrawals.

– Importance: Higher transaction limits or unlimited access promote ease of use.

– Scoring: Accounts with no transaction limits score highest.