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!
