Are You Ready to Leave Your Big Bank?

Recently, I have heard concern from clients and friends about their banks. Perhaps their concern comes from the Wells Fargo scandal last fall, Killer Mike’s call for people to put their money into black owned banks, or the more recent news about banks funding the Dakota Access Pipeline. Whatever the motivation, it’s no surprise that most people don’t trust big banks. Big banks are profit-making ventures that are responsible not only to customers but also to their shareholders, and sometimes it seems that the customers come in second place.

Despite a desire to speak with our wallets, the effort to find a new bank can be daunting and some people are concerned about higher fees, fewer ATMs or less technology if they go with a local bank or credit union. In fact, many credit unions offer higher interest rates and have lower fees since they are not paying out dividends to their shareholders at the end of each quarter. Smaller banks are also able to offer better rates as they have fewer shareholder obligations.

Credit Unions are nonprofit cooperatives that exist to serve their members. You can become a member of a credit union through an employer, an organization such as a church or social group or a community. While they cannot serve the general public, the rules of membership have become very expansive and are often based around location. Credit Unions often offer great educational tools to help you manage your money. Additionally, when they issue loans they are literally putting money back into the community they serve. If you are interested in looking for an available option near you, the Credit Union National Association offers a great search tool to find an option near you.

If you cannot find a credit union near you or one that appeals to your needs, you might consider a smaller local bank. While they remain a for profit business, the fact that they are smaller often means they have stronger ties to the community and are more likely to know their customers. Also, most of them are not publicly traded and therefore have a smaller burden of dividend payments to their shareholders. Many small local banks include mission statements on their websites which speak to their community values and goals. You can also look to a few websites such as the Global Alliance for Banking on Values,  Community Development Bankers Association, or the Independent Community Bankers of America. You can also ask around to your friends and family to hear their feedback on smaller banks and how they see them in your community.

Many online banks offer better rates than their brick and mortar companions but they may not offer you the separation from big banks that you are seeking. For instance, Ally bank is associated with the lending arm of General Motors (GMAC) and Simple is owned by BBVA (Spain’s 2nd largest bank). With any institution that you intend to use for banking, take a look behind the scenes to see if their ethics align with yours.

If you have looked around and decided that you want to move your money out of a big bank, you should make a list of all the parts of your life which are touched by your banking needs. You will want to make sure that any bank or credit union you chose to work with can accommodate your banking needs. Consider not only if your new bank offers the same services but what fees might be associated with them. These might include:

  • Direct Deposit
  • Bill Auto Pay
  • Transfers
  • Linked Accounts
  • Overdraft protection
  • Virtual Check depositing
  • Person-to-Person payments
  • Paper Checks
  • Debit Card / ATM access
  • Safe Deposit Box
  • Apps and/or online access

Once you are sure that your decision is the best for you both in terms of convenience and personal values alignment, you are ready to make the switch. I would recommend that you make the switch in stages:

  1. Look at statements from your current account to generate a list of charges that are tied to it:
    1. Credit cards
    2. Autopayments for utilities or cell phone
    3. Direct deposit from your employer
    4. PayPal or other ecommerce accounts
    5. Investment or savings accounts
  2. Open your new account, but do not close the old one yet.
  3. Leave funds in your old account for a couple months in order to cover uncashed checks, autopays that process before you can change them or other unexpected debts.
  4. Using the list you generated, update your direct deposit and auto pays with your new banking information.
  5. Go to vendor websites to update needed information on both ends of the transaction to avoid confusion.
  6. After a couple months, close your old account. It is generally recommended that your get confirmation of the closed account in writing to avoid any future confusion.

If you are moving more than one account (checking, savings, etc) follow similar steps for each of them. You just want to avoid any unnecessary charges for overdrafts or missed payments.

Once it’s all done, you can sit back and feel more comfortable about how your money is being used. Then you just need to think about your credit cards ?

Wednesday, March 29th, 2017
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