In response to a comment on my last post, I am going to highlight some of the reasons why I think more people should take their business to a community bank or credit union. Many of these reasons are based on recent history with the financial services and housing crisis that resulted in the 'Great Recession.'
First of all, big banks (Bank of America, Citigroup, Wells Fargo, etc.) are publicly traded corporations. Their primary goal is to increase shareholder wealth. Providing great customer service through charging lower (or no) fees, employing well-trained customer service representatives, and offering higher interest rates on accounts and lower interest rates on loans are all ways to NOT increase shareholder wealth as they are more expensive ways to do business.
To increase shareholder wealth, many of these banks charge exorbitant rates on credit cards after initially offering a lower teaser rate, invest in risky financial products that I have a hard time understanding how they work (sub-prime loans anyone?), and generally don't provide good customer service as a way to cut costs. Many of these banks also took federal bailout money and did NOT use it to help customers and thus the overall economy. (There are many more details surrounding this but I will not delve into them here.)
Community banks and credit unions generally have to develop and maintain a good relationship with their customers or else they will not have customers for very long. I recently emailed the community bank that I opened an account with and within an hour I had a response from the same person I spoke to on the phone last week. I think the reason that more people have not been using these smaller banks and credit unions is that bigger banks advertise more and have more physical locations that increase their visible presence in a community. This is not to say that smaller financial institutions are not going to make mistakes or mistreat you- but if they do your decision to leave hurts them a lot more than it would a bigger bank.
You can also watch this interview from Fox Business with the CEO of a community bank on why people are leaving big banks.
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so helpful; thank you. Do you have any you could recommend in Austin?
ReplyDeleteHi Candice,
ReplyDeleteCheck out this website to find a sound local bank. http://moveyourmoney.info/find-a-bank
The site uses a rating system to filter out local banks that engaged in the same risky behavior as the big banks.
Not sure I agree with some of the comments. Having bad customer service would drive away customers, and thereby decrease shareholder wealth. Therefore, good customer service is vital to small and large alike.
ReplyDeleteAlso, some of the big banks were forced to take the "bail out" so that the weaker sisters were not readily apparent (of course they were found out very quickly thereafter). The money was paid back with all interest. How many other government investments are fully repaid with interest to boot?
And because of some efficiencies with a larger institution, large banks can offer competitive rates on loans (trust me I know).
Finally, credit unions often operate under the radar of good regulation and have powerful lobbies themselves, so I wouldn't group them with small community banks, as if they were equal.