banking

What can you gain by ditching large banks?

The online alternative

For those with a hankering to sit in front of a computer rather than drive to a brick-and-mortar bank or credit union, online banking may be your best alternative. You might even find an uptick in the rates you're receiving from your physical banking institution. Some examples of online banking services with competitive rates to credit unions and banks are SmartyPig, Capital One 360 and Ally Bank.

Even online brokerage accounts are adding banking services to expand their offerings, including TD Ameritrade, Fidelity, Scottrade and Capital One 360. Scottrade has offered a free checking account as long as you also have a brokerage account. E-Trade has offered a Max-Rate checking account with free, unlimited ATM fee refunds and other perks, according to the brokerage website.

Banks aren't going to take a back seat to online alternatives easily. For instance, Virtual Wallet by PNC is new way to group your money, the company's website says. On these accounts, consumers are offered free ATMs, online bill pay and help with tracking their money, as well as alerts and reminders.

Does size matter?

Randy Jarvis, president of Union National Bank in Sparta, Wis., says that there is a growing trend in large institutions of charging more and larger bank fees to make up for lost interchange, or so-called swipe fees, on debit cards as a result of changes in banking laws. But he says you might downsize to a community bank, generally regarded as those with less than $10 billion in assets, as a replacement.

"Small banks tend to have an overall lower fee structure and can typically provide all the same services of large banks, but with person-to-person service. Community banks also have the added benefit of investing back into the local economy," Jarvis says.

With an ever-changing banking landscape, some banks become even larger. As a result, you may not know whether it's better or worse for you or your deposit accounts until the newly formed bank changes the terms and conditions on accounts in the wake of a merger or bank acquisition.

For example, Wells Fargo announced its merger with Wachovia in 2008, but it took months to unify the fee structure of both banks and for customers to know what fees they would pay on their accounts going forward.

Even with pressure from online banks and nonprofit credit unions, banks have continued to increase their fees on consumer accounts. "It would be nice to say that the mass exodus from banks has forced them to change their policies, but this simply isn't true," says Schrage.

He adds that banks have rebounded quite nicely from the recession. In the first quarter of 2012, the banking industry reported earnings of a little more than $35 billion, which is an increase of almost 23 percent over the same period in 2011.

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