Ever notice how TV commercials for big banks go really hard on the Schmaltz. Loving family is, cute babies, sweet old retired people, micro pigs on leashes. It’s almost as if they’re trying to distract us from something. You mean like how in 2016 Wells Fargo admitted to creating 3.5 million fake accounts for customers to collect extra fees, and charged over 570,000 people for other insurance they didn’t need, resulting in over 20,000 customers going into fall. And then there’s the now infamous practices of Citibank, Lehman Brothers, AIG and other Wall Street giants of bundling toxic junk assets and repackaging them as triple a super safe investments which led to a near collapse of the international money system that ordinary people are still hurting from. And most americans feel that big banks are rewarded rather than punished for risky and predatory behavior. Bank of America received tens of billions and bailout funds in 2009 only to turn around the very next year and pay 35 billion and executive bonuses, not surprisingly our trust in these institutions is low. A recent Gallup poll show that only 27% of americans have confidence in banks, but this is not a new phenomenon. The 14th century poet Dante place moneylenders in the seventh circle of hell below violent murderers and blasphemers, so being suspicious of big banks is nothing new, but what can you do? You’ve got to stash your cash somewhere and who can get through life without ever taking a loan or using a credit card. Thankfully you do have options. Alternatives to big banks have been around for a while, and if you haven’t looked into them yet, it might be time.
One good alternative is a local community bank. Their fees and charges can be lower than national chains and you can be pretty sure they won’t use your money for risky bets or Wall Street gambles, instead, they tend to make investments in the immediate region, helping to develop projects and businesses that create jobs and improve spaces in your home town.
There are over 52,000 community bank locations nationwide and you can find ones in your area by checking out the icba’s website. Then there are banks that don’t rely on physical locations. Online banks usually have lower fees partly due to having no brick and mortar expenses. They also tend to have no account minimum, don’t charge overdraft fees, and ATMs are fee free at tens of thousands of locations. Both local banks and online based banks still typically offer FDIC protection on up to $250,000 worth of deposits per person and account type. So for most people, they are just as secure as the big national chains.
You can also choose to ditch banks altogether and open up an account at a credit union. Credit unions allow you to make deposits and withdraws, take out loans and credit cards and enjoy most other services you might expect from a bank. But unlike banks, credit unions are non-profit entities, any profits made by the credit union are returned to you in the former reduced fees, higher savings rates and better loan terms. This is because credit unions technically don’t have customers. They have members, everyone who keeps their money at a credit union is seen as a part owner of the institution. They usually all share a common bond, perhaps they all live in a particular geographic location, work in the same industry or are all alumni of the same university. One member’s deposits end up becoming an auto or business loan for another member, team work. Credit unions offer FDIC like protection through the ncusif. Most credit unions are part of a national shared branch network which allows you to utilize thousands of other credit unions, just like they were your own. So depending on your credit union, you could have access to even more ATMs and branches than with a big national bank. Maybe this all sounds great to you and you’re ready to say goodbye to your big bank, but there are a few drawbacks before making the switch. Because of their size and scope, big banks are better international banking and lending.
Making it withdrawal from abroad or getting a loan in another country can be a tall order for many local banks and credit unions, so if you do a lot of traveling or have a cross border business, sticking with your big bank might make your life easier. Also smaller banks and credit unions usually can’t compete with the big banks digital offerings, so things like banking apps, budgeting software and online accounting tools are important to you, be sure to inquire about the technological support they offer. Even though these advantages come from big banks huge size, in their ads they often go out of their way to portray themselves as homey, familiar, even rustic. It’s as if they’re saying little organizations a more trustworthy. So if you find these commercials persuasive, maybe you should check out the smaller organizations in your neighborhood. That’s our two cents.