Monday, January 25, 2010
Friday, January 22, 2010
The Small and Medium Bank Quiet Revolt: What to Consider
I first ignored the small-bank movement because I thought it sounded weird. But after doing a little research, it sounded compelling. The whole idea is based on "people-powered" (read: populist) regulation of the Too Big to Fail (TBTF) banks. It encourages consumers to move their money from these large, risky banks to smaller community banks and credit unions who invest with the local community. Who can argue with that?
So I sat down and considered all that had to happen to make this a possibility for me. And it's a pain to do. Think about all the things you have in the typical checking account: your paychecks and refunds, and other "income" are linked to this account. You have online billpay for all your "outgo" spending. Your PayPal, Amazon, and other store accounts, credit cards etc., are all connected to your account.
However, banks are getting more and more annoying. You get charged fees out the wazoo for withdrawing money from the wrong place (like other ATMs), paying money in the wrong place (like international payment fees), drawing out too much money, etc. Also, many banks (especially the TBTF Guys) tend to engage in mean practices to extort as much money as it can from its customers. For instance, some banks like to screw over smaller customers with balances close to overdrafting by debiting larger transactions to draw them in the red, then processing the smaller charges one-by-one to build up overdraft fees. The industry is indeed shady; and it may not need to be taken over, but you need to protect yourself.
Plus, there are other, intangible benefits you can experience by going local:
Here's a link to Move Your Money, a site that will help you identify area banks with a grade of "B" or better with respect to financial strength and customer service. I'm not advocating you make that jump just yet. I haven't. But it's a good way to start the research that I'm doing. But you should also ask yourself these questions.
What Values Matter to Me?
It may seem strange to consider, but you should try to find a bank that can align with your values. Do you want a banker you can talk to when you get in a tough spot? Or do you value the "long-distance relationship" where everything is done online? Remember--you may need a loan for a car or home one day, and better rates are given to the well-known customers.
What are the Fees Like?.
Some banks like to lure you in with a free "X" but it's only for a few months. Then you can get gouged on the back end with loads of fees for minimum balances, checks written, ATM withdrawals, etc. think about how many hand-written checks you write per month how often you withdraw from ATMs, and where. Just walk into the bank, and tell them you're interested in opening an account, and ask for a fee schedule for various accounts. Some will hand it over, others won't. Its important to track down the schedule of fees for banks to find the right fit for you.
Go Slow
Finally, if you decide to make the transition, do it at your own pace. I suggest opening an account at your small/medium new bank (or banks) and begin transferring funds and switching accounts a few at a time. Maybe start with the online shopping ones. Once you get the rhythm, you can move a little more money a few more accounts. Perhaps you can draw your TBTF Bank's Account down to the required minimum funds (if they have one) and leave it there. Then go to your HR department and redirect your deposits to your new bank.
And enjoy the peace of mind!
Or something. I'm just beginning to do my research and plan to move. We'll see what happens, and I'll keep you posted.
So I sat down and considered all that had to happen to make this a possibility for me. And it's a pain to do. Think about all the things you have in the typical checking account: your paychecks and refunds, and other "income" are linked to this account. You have online billpay for all your "outgo" spending. Your PayPal, Amazon, and other store accounts, credit cards etc., are all connected to your account.
However, banks are getting more and more annoying. You get charged fees out the wazoo for withdrawing money from the wrong place (like other ATMs), paying money in the wrong place (like international payment fees), drawing out too much money, etc. Also, many banks (especially the TBTF Guys) tend to engage in mean practices to extort as much money as it can from its customers. For instance, some banks like to screw over smaller customers with balances close to overdrafting by debiting larger transactions to draw them in the red, then processing the smaller charges one-by-one to build up overdraft fees. The industry is indeed shady; and it may not need to be taken over, but you need to protect yourself.
Plus, there are other, intangible benefits you can experience by going local:
...community banks offer something big banks find nearly impossible to compete with -- local ownership and the ability to talk with a familiar face in the event of unexpected financial hardship, said Tyson of the community bankers group....
Here's a link to Move Your Money, a site that will help you identify area banks with a grade of "B" or better with respect to financial strength and customer service. I'm not advocating you make that jump just yet. I haven't. But it's a good way to start the research that I'm doing. But you should also ask yourself these questions.
What Values Matter to Me?
It may seem strange to consider, but you should try to find a bank that can align with your values. Do you want a banker you can talk to when you get in a tough spot? Or do you value the "long-distance relationship" where everything is done online? Remember--you may need a loan for a car or home one day, and better rates are given to the well-known customers.
What are the Fees Like?.
Some banks like to lure you in with a free "X" but it's only for a few months. Then you can get gouged on the back end with loads of fees for minimum balances, checks written, ATM withdrawals, etc. think about how many hand-written checks you write per month how often you withdraw from ATMs, and where. Just walk into the bank, and tell them you're interested in opening an account, and ask for a fee schedule for various accounts. Some will hand it over, others won't. Its important to track down the schedule of fees for banks to find the right fit for you.
Go Slow
Finally, if you decide to make the transition, do it at your own pace. I suggest opening an account at your small/medium new bank (or banks) and begin transferring funds and switching accounts a few at a time. Maybe start with the online shopping ones. Once you get the rhythm, you can move a little more money a few more accounts. Perhaps you can draw your TBTF Bank's Account down to the required minimum funds (if they have one) and leave it there. Then go to your HR department and redirect your deposits to your new bank.
And enjoy the peace of mind!
Or something. I'm just beginning to do my research and plan to move. We'll see what happens, and I'll keep you posted.
Subscribe to:
Posts (Atom)
Posts
