Approximate reading time: 6 minutes
Almost a year ago, a group of grassroots activists launched a campaign urging bank customers to transfer their accounts from global megabanks like Wells Fargo and Citibank to smaller online banks, regional banks, or credit unions. Known as “Bank Transfer Day“, the effort was set to commence on November 5th, 2011 when it was hoped that bank customers would respond in overwhelming fashion by closing their accounts.
While “Bank Transfer Day” was largely a protest movement against the rapaciousness of “too big to fail” (TBTF) bank monopolies that took gargantuan risks and then turned to taxpayers to bail them out for their foolishness and fraud, it turns out that moving your funds from large banks to smaller banks makes a lot of financial sense as well. Here’s why:
- A la carte “services”: Increasingly, the big banks are shifting to a business model that is more like the airlines — selling consumers an unbundled product and then nickel and diming customers on an a la carte basis for services that used to be included for free. If you followed the brouhaha over Bank of America requiring customers to pay $5 a month for their debit cards for purchases you’ll know what I’m talking about. Yes, BoA was forced to back down after a huge consumer backlash, but rest assured, BoA and the rest of the megabanks are always looking for additional ways to part you with your money.
- Overdraft charges: While the Federal Reserve finally prohibited banks from automatically enrolling customers in overdraft protection programs late last year, you may still be enrolled in an overdraft protection plan and not even know it. The insidious thing about these plans is that overdrawing by even a few dollars can trigger outrageous fees. That’s because the banks actually manipulate the order of transactions and process them in a way that insures you’ll get screwed with higher overdraft fees. A new report from Moebs calculates that the total revenue generated from overdraft fees grew from $30.8 billion in June 2011 to $31.5 billion in June 2012 — a $700 million increase in one year.
- Stability: Small regional banks largely avoided the insane lending excesses of their gargantuan brethren and their balance sheets are typically in better shape than welfare recipient megabanks. For one thing, many smaller banks aren’t sitting on billions or even trillions of dollars of derivatives exposure.
- Ease of borrowing: First off, big banks still aren’t lending much. If you don’t believe it, go into any megabank branch and try to refinance a loan. Even if you have a credit score above 800 and a loan-to-value under 70 percent, there’s a good chance you will still be denied. There are all sorts of reasons for this (and some of them are in fact good — banks needed to recapitalize after the 2007 meltdown) but the fact remains that after the past few years of lending to anyone with a pulse, big banks are now quite stingy. Not so with small banks, and particularly for small business loans. According to Small Business Trends, big banks are making fewer small business loans, while regionals and locals are continuing to approve a much higher percentage of small business loan requests.
- Small town service: There are things that happen in a small town bank you could never imagine with a megabank. Trey in particular has had many situations where he was in a foreign country and had to pay a subcontractor for his property management business immediately. He was able to call the teller at his bank, have her withdraw a large sum of money from his account, and pay his subcontractor directly, all without a signature or electronic correspondence. Try that at a megabank.
Yes, changing your bank is a pain in the ass, but it’s a great example of what Fleet Maull calls “Radical Responsibility.” If you’re not familiar with Maull, he’s a well-known author, consultant and executive coach in the Buddhist tradition who spent 14 years in prison on drug charges before launching the concept of Radical Responsibility.
Radical Responsibility is all about choosing to be 100% responsible for everything that you create in your life. It’s about owning completely the decisions, choices and actions you take rather than blaming them on circumstances, outside forces or other people. The concept of ownership is important because it places our focus on the one area where we have the most influence, power, and control — with ourselves.
Blaming megabanks for the mess they’ve made of the economy is easy, but it’s a waste of time and energy. Caterwauling does nothing to actually change our circumstances. It just leaves us feeling frustrated and helpless. Radical Responsibility approaches problems differently by asking “What can I do to create something different?” That simple step takes us out of the victim trap and puts us into a more creative, problem-solving mindset that suddenly opens up possibilities.
The ongoing financial crisis of the past several years has convinced many of us that we are victims of forces beyond our control (Wall Street, Washington, etc) Events like “Bank Transfer Day” convince us that we are NOT victims in the traditional sense… We are only victims of our limited thinking.