The ideal bank for a community association is not necessarily the same one you would use for your personal savings. Knowing what to look for in a bank for an HOA, however, can make such a huge difference in the ease of your HOA finances. In this guide, we’ll take a look at how to choose a bank, and what to consider when choosing a bank from among several likely candidates. Taking the time to learn how to pick a bank for an HOA will save you a lot of time and effort later on.
In this article:
The Right Bank for an HOA
Homeowners associations have specific financial needs and processes. Given that, not all banks will be the right fit to serve your HOA, especially in certain situations. Associations that manage large funds or a sizable number of related accounts will need more from the bank they use.
That said, you already know a lot about what to look for in a bank to serve your HOA. You want the bank to be a quality financial institution. You want the bank to offer your HOA competitive rates. Of course, you and the rest of the board want the bank to provide excellent customer service, as well. Not all banks are the same, especially when it comes to services that an HOA will frequently use.
There Are Banks That Specialize in Homeowners Associations
Both your local banks and national banks will do well for your regular savings, checking and online banking needs. After all, the transactions you do on your personal accounts are governed by standard rules.
Community association banking, on the other hand, can be more complicated than that. There are federal and state rules to follow when it comes to HOA transactions. Your HOA governing documents will likely have something to say about each financial transaction, as well.
Fortunately, there are banks that have systems in place just for homeowners associations. These systems can help you navigate the complex rules that govern HOA payments. Some specialized banks can include your HOA governing declarations into your banking configuration. Important things like these add up to make sure that each payment is in line with all the rules your HOA needs to keep track of.
Look into the Right Banking Programs
Homeowners associations do more than just let their funds sit in a bank account. All HOA board members have a fiduciary duty to ensure that the HOA operating accounts and reserve funds are properly managed and protected.
Most HOA board treasurers also have the duty to invest those funds, as well.
That means the HOA board often needs to do more than just keep track of their accounts. They also need to invest the funds to ensure a yield. They also need to make sure that they are liquid enough so they have money to spend as needed.
The added complexity of investing and allocating funds, while managing liquidity is sometimes beyond the capabilities of an HOA board. That’s why many community associations work with HOA financial management companies. The financial professionals from these companies will recommend a set of banking programs for the association.
The right bank for an HOA should be able to support these investment programs. The perfect bank for an HOA can do so while understanding the business of running an HOA as well as the bylaws that govern them.
Don’t Forget About Safety
Ease of transactions, investment banking, and more. These are nice things to have in a bank for an HOA but make sure that you don’t forget about your first priority.
Keeping the HOA operating and reserve fund accounts safe is a critical consideration. That’s why you need to choose a bank that provides the right level of protection for your association funds.
First, make sure that the bank you are considering is insured by the FDIC. It would also be better if they are also insured by other third-party insurers, on top of the FDIC insurance.
It’s good to keep in mind that the FDIC has an insurance threshold for each depositor. This limit, at a total of $250,000, covers all accounts held at a single bank. That total already mitigates a good amount of the risk. However, many associations deal with funds that easily exceed that figure – in fact, it’s all too common to have operating funds twice the FDIC limit.
One way to go around this limitation is by having accounts distributed among multiple banks. That also means you will need to search for several banks that will fulfill your criteria.
Reliable Service Is A Must
When choosing the right bank for an HOA, you need reliability. The bank should be able to process payments fast.
With the help of computerized banking, most banks can make a payment and update an account quickly and reliably. That said, a bank should be able to process payments with few to no mistakes.
They should also be able to provide the association with a reliable update to make sure that every payment has been properly accounted for.
Mistakes can and do happen. It’s also important for a bank to be able to deal with user errors. A good bank will have a robust process that can deal with common issues. Payments with insufficient documentation are one common issue, and all too often, it can lead to additional callbacks that slow down the process to a grind.
A good bank for an HOA will be able to deal with user errors like these while still keeping the process automated for the most part.
Work with the Right Bank for an HOA
Do you need help managing and handling your HOAs banking, finances, and management needs? A reliable HOA management company can help guide you in making the best decisions for your association. That includes choosing the best bank for an HOA that you can work with. Choosing the right bank is a critical choice that can affect your association’s financial stability. If you need more information, just give us a call.
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