Alternatives to Big Banks:
In 2016, the amount of profits generated by bank fees rose over the previous year for the 3 biggest banks in America: JP Morgan Chase, Bank of America and Wells Fargo. These 3 banks made billions from overdraft fees, maintenance fees, and ATM fees as the average “out of network” ATM fee continued its annual increase, climbing to $4.57.
An alternative to a big bank is a credit union. They usually have fewer and less costly fees as well as better rates on loan products than the big banks. For example, federally chartered credit unions (usually identified by the word “Federal” in their name) can’t have a credit card interest rate more than 18%. To find out if you are eligible to join a credit union near you, go to www.ibelong.org. Many credit unions participate in the Co-Op Shared Branching network so that you can use the services of any branch or ATM in the network https://www.co-opfs.org/Shared-Branches-ATMs
Credit unions have brick and mortar locations, but they may not have the highest interest rates on savings. For that, you would need to turn to an online bank. For example, Ally Bank has high yield savings accounts that have interest rates substantially higher than the big banks. While a savings account from Bank of America has an interest rate of about 0.01%, the Online Savings Account from Ally has an interest rate of approximately 1.2% (more than one hundred times that of BoA). You can find a listing of the high yield savings accounts at www.magnifymoney.com.
Another advantage of credit unions and an online bank like Ally is that they may allow you to open multiple savings accounts, which you can use for different savings goals. For example, saving up for that once a year a property tax bill or gift giving at holiday time. Before you open a new account, be sure to verify that the bank is FDIC insured (the equivalent for a credit union is NCUA).
Finally, community banks may offer better loan and savings rates than the big banks; as well as a higher probability of qualifying for small business loans.
What’s your why? What are you looking for in a bank? Is it to avoid predatory fees and high interest payments on loans and other exploitative tactics exhibited by some financial institutions? Is it for the lowest interest rate on a credit card? Is it the ability to earn high interest on your savings? Is it for better customer service? Is it for lucrative rewards programs on credit cards? Is it for the latest and greatest in technological advances? Is it for convenient branches on every corner in the country and overseas? Determine what is important to you, then decide whether the best collection of what you value is found in a big bank, a community bank, an online bank or a credit union. Remember that you don’t have to choose just one option. For example, you can choose two options that complement each other: an online bank for the high interest rates matched with a credit union in the shared branching network for the brick and mortar presence.
References/Resources:
Big Banks rack up $6.4 billion in ATM and overdraft fees http://money.cnn.com/2017/02/22/investing/atm-overdraft-fees-rise/index.html
Find an FDIC insured bank: https://research.fdic.gov/bankfind/
Find a Credit Union www.ibelong.org
Find a Community Bank http://www.icba.org/go-local/take-part/bank-locator
How do I know if my Credit Union is federally insured by the National Credit Union Administration (NCUA)? https://www.mycreditunion.gov/Protect/pages/si.aspx
Co-Op Shared Branching network so that you can use the services of any branch or ATM in the network https://www.co-opfs.org/Shared-Branches-ATMs
Step by Step Guide on how to switch banks https://www.thebalance.com/how-to-switch-banks-315430