Weigh that rate offer. Does the value add up?

The Federal Reserve has repeatedly raised its benchmark federal-funds rate in attempts to reduce inflation. The federal funds rate is what the Federal Open Market Committee (FOMC) recommends commercial banks charge each other to borrow from their excess reserves.

This news doesn’t just affect banks and bankers; it also has an impact on business and personal finances.

A rising rate environment might draw your attention to the money you are saving, the interest you pay on loans and credit cards, and (most importantly!) how your finances fit together. Now is a great time for you to work with your banker to map out a plan for the future.

In general, rising rates are a great incentive to amplify or speed up the rate at which you pay off higher-interest debt to reduce your total outlay. Eventually, you may see flyers and postcards offering promotions and bonuses for your deposits. Are they worth taking?

Before you bite the hook that dangles a better rate, know that you’re swapping lot more than a fraction of a percent.

It’s a big decision, so before you weigh your options, make sure you have the right mindset.

Rate shopping can be like driving all over town to save a nickel per gallon on gas. A rate shopper expends a lot of effort for that extra tenth or quarter of a percent – whatever they can get. Some even split them between multiple banks, opening CDs at one bank, money markets at another and checking at a third. This fragmented model isn’t just inconvenient; frequent switching can be downright disruptive to household or business finances.

Check the fine print. When it comes to rates, the number isn’t the only thing to look at. Look at the terms. How long will it last? Are there other requirements? When it expires, will you have to start the shopping process all over again? Will the terms and conditions of a promotional rate today prevent you from being able to take a stronger offer in the future?

Communication is key. Find out how the bank will notify you of any future rate changes. At some banks, you might not get much notice other than the terms you agree to when you open the account. Others might send you a form letter. Some might call you personally to talk it over.

You got a coupon, but what’s the total value of what you’re getting in a new bank? Look at the features and value proposition and decide if it’s worth giving up an extra fraction of a percentage point.

That doesn’t mean the rate is unimportant. It’s definitely a factor. And here’s what else you should look for.

• Capabilities
  Most banks offer similar products and services, and even rates aren’t all that different. So take a look at how you’ll access them, like with online and mobile banking, ATM policies and any other features you’ll need. What kind of controls are available for fraud prevention? Look past the immediate need and toward any future goals you might have. Are decisions made locally or does everything have to go through a corporate headquarters?
  
  Ask about application processes and systems for payments. For example, mortgages might not vary that much from bank to bank, but their application processes and servicing will. How are extra payments toward principal handled, and what are the automated options?

• Service
  For a lot of people, great service is priceless -- the differentiator that outweighs everything else. How important is that to you? This is where recommendations from your trusted friends and family can be very valuable:
  
  How available is their banker, and what’s the bench strength when that individual is away or on another call? Do people work in silos, where each person knows only one aspect of banking, or is it a multi-functional crew that makes each experience a smooth one? When they have a problem, do they wander through the phone tree, or do they have a direct connection to get help?

• Unity
  Splitting up your savings might earn you a few extra dollars, but it also makes your life more complicated. Take a close look at the bank where you keep your checking account or business loans. Having all your accounts and services at one bank gives you one point of contact for everything you need and allows that person to give you better service and advice. In some cases, bringing accounts together in one bank qualifies you for waived fees or better rates.
  
  When you interact with your bank, how do you feel? This is paramount. If a bank doesn’t make it easy for you to do your daily business, almost nothing else can make up that deficit. Whether you’re working online, on the phone or in an office, your bank should bend over backward to make things simple and frustration-free. How you’re treated – and how you see other people being treated – should tell you everything you need to know.
  
  

Blair Miller is an area manager for Pinnacle Financial Partners based at the firm’s McBee office in Greenville, SC. He can be reached by phone at 864.315.1372 and by email at Blair.Miller@pnfp.com.