The big national banks have received extensive negative press lately. Bank of America, Wells Fargo, Chase and SunTrust's now-scrapped plans to introduce a monthly fee for debit card usage helped to spark Bank Transfer Day, a nationwide protest on Nov. 5, 2011 in which dissatisfied big-bank customers switched to small banks and credit unions.
The National Association of Federal Credit Unions (NAFCU) states that 63.9% of NAFCU members who responded to the association's informal online survey reported a membership increase in October 2011. The survey also found that credit union members' most common reasons for switching were dissatisfaction with banks, increased debit card fees and poor customer service.
Similarly, the Credit Union National Association (CUNA) states that Bank Transfer Day brought credit unions 40,000 new members and $80 million in new savings account funds. The CUNA also reported that in the build up to Bank Transfer Day, about 650,000 people joined credit unions and deposited $4.5 billion in new savings.
Despite the perceived wisdom of these crowds, you might want to stick with the big banks. Here's why. (For more, read How Protests Could Change Banking.)
Big Banks Aren't Necessarily Impersonal
Katerina Taylor, an experienced banker and a financial literacy educator with Smart Kidz Money Matters, says that small banks try to leverage the idea that because of their size, they deliver intimate community customer service to their clients. But this idea is not a fact.
"Every bank regardless of size can offer a hometown community client experience. Many big banks and regional banks employ people right from their particular communities. Your big bank teller or personal banker might go to church with the local pastor, see their former principal in the grocery store or have kids that play on the same baseball team," she says.
In other words, you shouldn't assume that you'll get more personal service at a small bank, or less personal service at a big bank.
Big Banks Have Vast ATM Networks and Ubiquitous Branch Locations
When you visit your own bank's ATM, you won't pay a fee for withdrawing money, and the big banks have lots of ATMs. These ATMs are not just at the banks themselves, but also in popular retail locations like grocery stores, convenience stores and mass merchandisers. Bank of America (NYSE:BAC) has more than 18,000 ATMs, while Chase boasts 16,500 ATMs and Wells Fargo (NYSE:WFC) claims 12,000 ATMs. Among the big banks, Citibank tops the list with 29,000.
If you use ATMs frequently, it makes sense to have a checking account that makes it easy to avoid ATM fees, so using a big bank with a major presence in your area might be the best choice.
There are other ways to get no-fee ATM access, though. While you'll pay the ATM fee up front when you withdraw money, some online banks will rebate some or all of their customers' ATM fees. Ally Bank and Charles Schwab Bank (NYSE:SCHW) charge no ATM fees, and First Trade Union Bank will refund up to $20 a month in ATM fees. Some credit unions and small banks also provide this service.
If you do any of your banking in person, however, and you want the flexibility to visit a teller even if you're traveling outside of your home city or state, you'll probably want to belong to a bank with numerous branch locations. Chase has 5,300 branches and Wells Fargo has 6,200, according to the companies' websites.
Big Banks Simplify Banking Abroad
If you frequently travel abroad or have an international vacation coming up, an account with a major bank could save you money.
"Some big banks and regional banks have developed a relationship with independent ATM retailers so that even if their clients use the ATM machine there is no cost," says Taylor.
Bank of America customers can use their ATM cards with no fees at banks in the Global ATM Alliance. The alliance includes BNP Paribas (France), BNL d'Italia (Italy), Barclay's (England), Deutsche Bank (Germany), Westpac (Australia and New Zealand) and Scotiabank (Canada and the Caribbean). Citibank customers can make fee-free withdrawals in 40 countries at a Citibank ATM, at MoneyPass or Publix Food Stores ATMs. On the other hand, Wells Fargo and Chase customers pay a $5 fee to withdraw cash at an ATM outside of the United States.
Big Banks Can Be Better for Business Banking
Some business customers might find that big banks meet their needs better than small banks.
"I believe my company is an excellent example of how the big banks have actually helped our business," says Derek Capo, CEO of language-immersion program company Next Step China.
"We started our business back in the thick of the financial crisis and Bank of America bent over backwards to make sure they made us happy. They have waived hundreds of dollars in fees and we have saved money because of their Global ATM Alliance as we can take out money in China with no ATM fees."
Capo is proof that not all big bank customers are disgruntled. He says Bank of America's advice helped his company set up its accounts and avoid a fraudulent check problem.
"I really think that for small business the big banks are okay," Capo says. "No small, medium or even larger bank could have done what Bank of America did for us. Maybe we are the exception, but I don't think we are special," he adds.
The Bottom Line
Big banks aren't necessarily bad, and small banks and credit unions aren't necessarily a better alternative. Each person has unique banking needs and should evaluate the merits and shortcomings of the available options to find the best fit. It might even make sense to have accounts at multiple banks to meet multiple needs. Ultimately, your reason for choosing a bank should not be based on its size, but on the compatibility of its services and features with your banking needs. (For more articles on banking, check out The Evolution of Banking and Bag The Best Bank Account.)
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