Ever notice how TV commercials for big banks
go really hard on the shmaltz?
Loving families, cute babies, sweet old retired
people, micropigs on leashes.
It’s almost as if they’re trying to distract
us from something…
Oh, 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 auto insurance they
didn’t need, resulting in over 20,000 customers
going into defaults?
And then there’s the now infamous practices
of Citibank, Lehman Bros, AIG and other Wall
Street giants of bundling toxic “junk”
assets and repackaging them as AAA 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
in bail-out funds in 2009, only to turn around
the very next year and pay $35 billion in
executive bonuses!
Not surprisingly, our trust in these institutions
is low.
A recent gallup poll showed that only 27%
of Americans have confidence in banks.
But this is not a new phenomenon.14th-century
poet Dante placed money-lenders in the 7th
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 out a loan or using a credit card?
Thankfully, you do have options.
Alternatives to big banks have been around
for a long time, 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.
Community banks also tend to make investments
in the immediate region, helping to develop
projects and businesses that create jobs and
improve spaces in your hometown.
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 have no physical
location whatsoever: Online-based banks like
SIMPLE and CHIME usually have lower fees partly
due to having no brick-and-mortar expenses.
They also tend to have no account minimums,
don’t charge overdraft fees, and ATMs are
fee-free at over 30,000 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 could also choose to ditch banks all together,
and open up an account at a credit union.
Credit unions allow you to make deposits and
withdrawals, take out loans and credit cards,
and enjoy most other services you might expect
from a bank.
But unlike banks, credit unions are all non-profit
entities.
Any profits made by the credit union are returned
to you in the form of 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.
And 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.
Teamwork!
Credit unions offer FDIC-like protection through
the NCUSIF, and most credit unions are part
of a national shared-branch network which
allows you to bank at 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 sayonara to your big bank, but
there are a few drawbacks to consider before
making the switch.
Because of their size and scope, big banks
are better at international banking and lending.
Making a 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 travelling or have a
cross-border business, sticking with a big
bank can make your life easier.
Also, smaller banks and credit unions usually
can’t compete with the big banks’ digital
offerings.
So if 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 that little
local organizations are more trustworthy.
So, if you find these commercials persuasive,
maybe you should check out the smaller organizations
in your neighborhood.
And that’s our two cents!
