|
Big banks
are at it again, ticking off customers with nagging
fees. Bank of America is at the forefront, recently
announcing a new $5-per-month charge for using a debit
card.
And the
Occupy Wall Street movement has renewed sour feelings
toward big financial institutions that were deemed too
big to fail during the financial crisis and received
bailout loans from Joe and Jane Taxpayer.
Small
banks, online banks and credit unions are taking the
opportunity to put up their dukes and take a few swings
at megabanks while they’re punchy from the bad
publicity.
So, big
or small? Who wins on the merits in a toe-to-toe fight
between megabanks and smaller institutions? Who should
consumers put their money on — or money in? Is bigger
better, or is this a Rocky Balboa story?
For help,
we talked to Greg McBride, senior financial analyst at
Bankrate.com; Tony Giorgianni, associate money editor at
Consumer Reports; Mike Schenk, vice president of
economics and statistics at Credit Union National
Association; and Richard Barrington, personal finance
analyst for MoneyRates.com.
Spending
Smart judged winners for each round. See if you agree.
ROUND 1:
FEES: Granted, big banks generally offer ways to dodge
common fees, such as maintaining a minimum balance in an
account or having your paycheck directly deposited into
an account. But, overall, you’re far less likely to
pay monthly fees at smaller banks, online banks and
credit unions, experts say. Financial information
website Bankrate.com found that about three-quarters of
large credit unions offered free checking accounts, with
no strings attached. Just 45 percent of banks did,
McBride said. Fees are a hot issue, so this is an early
knockdown and a round won by small banks, online banks
and credit unions.
Winner:
Smaller institutions.
ROUND 2:
ATM ACCESS: This is where big banks traditionally have
had a big advantage. But smaller competitors today are
able to join ATM networks that allow customers to use a
variety of teller machines without charge. And some,
notably online banks that usually have no ATMs of their
own, reimburse customers for fees incurred at any bank
machine. But these reimbursements are often capped at a
certain dollar amount, maybe $12 a month. So it’s not
a good choice for frequent visitors to ATMs. Overall,
however, most people will find that large banks still
have an advantage here, with ATMs not only at their many
branches but also in a variety of retail stores.
Winner:
Big banks.
ROUND 3:
BRANCH NETWORKS: This round will look much like the
last. For some consumers, it might put small banks on
the ropes. Small banks might have a plethora of branches
in a limited area, but it’s no match for a big branch
network nationwide. Some credit unions have sharing
agreements, where customers of one credit union can walk
into the branches of other credit unions and use their
services. Of course, most online banks have no branches
at all. If you need face-to-face service in a variety of
geographies, big banks take the round for most
consumers.
Winner:
Big banks.
ROUND 4:
CUSTOMER SERVICE: Big banks can boast round-the-clock
customer service centers, reachable by phone and online
chat. But if you define service as a financial
institution being more personable and accommodating to
individuals, credit unions are especially known for
that. Small banks are known for down-home service. This
is huge comeback round for the little guys.
Winner:
Smaller institutions.
ROUND 5:
OWNERSHIP: Big banks are obligated to make as much money
as they can for shareholders, which often is on the
backs of customers. And if you’re mad at big banks for
their role in the financial crisis, ownership of your
bank matters. Nonprofit credit unions, specifically, win
this round because they are beholden only to their
customers, because customers are the owners. But that
also means you have to qualify to join a credit union.
Find out how at ASmarterChoice.org. “We take what the
stockholders would have gotten and then give it back to
our members (in the form of consumer-friendly products
and services),” Schenk said.
Winner:
Smaller institutions.
ROUND 6:
FINANCIAL PRODUCTS: Credit unions, in particular, once
had sparse offerings for saving, checking, borrowing and
online banking. Nowadays, it’s a closer call, as
smaller institutions of all flavors expand their lines
of financial products. Still, a large bank is likely to
offer more account and loan options. It’s likely to be
especially valuable to wealthier depositors and
small-business owners who can meet more of their needs
under one roof, McBride said.
Winner:
Big banks.
ROUND 7:
TECHNOLOGY: Small banks and credit unions probably offer
online account access and perhaps electronic bill
paying. And, of course, online banks are likely to have
decent technology options. But having advanced
offerings, such as mobile banking and person-to-person
payments, are largely the domain of large banks, McBride
said. Remember that a move toward technology might mean
charging for low-tech basics, such as a mailed paper
statement.
Winner:
Big banks.
ROUND 8:
RATES: Credit unions, small banks and, especially,
online banks typically pay higher rates on savings and
offer lower-rate loans. But that’s not always true, so
compare rates. And mortgage rates, in particular, are
not necessarily lower at smaller banks, McBride said.
Winner:
Smaller institutions.
ROUND 9:
SAFETY: Most bank and credit union deposits are
federally insured to $250,000. Your money is safe,
either way.
Winner:
Draw.
So,
that’s four rounds apiece and a draw. Of course, like
some prizefights, this one was rigged to make the point
that no single type of financial institution is right
for everybody. If you’re angry about fees and
bailouts, or you like personalized service and generally
better rates, seek out a community bank or credit union.
If technology, breadth of product offerings and such
convenience features as a large ATM and branch network
are important, a bigger bank might be best.
Although
it might add complexity, you can get the best of both:
checking at a big bank and loan and savings at a smaller
one, for example, Giorgianni said.
“There’s
really no single answer,” he said. “You have to do
your homework.”
———
BANK-SWITCHING
RESOURCES
—Bankrate.com
—Moneyrates.com
—Findabetterbank.com
—ASmarterChoice.org
(credit unions)
—How to
switch a checking account by Consumers Union (.pdf):
http://www.bit.ly/glWqfr
|
