The 2008 financial crisis led to some action in Washington that affected banking and borrowing customers -- the creation of the Consumer Financial Protection Bureau, and the passage of some regulations requiring proper disclosure and longer notice of changes. But the most significant result of the debate leading to these reforms was to scare the pants off the big banks. In advance of any new restrictions, they moved to protect their profits by creating new fees and hiking others.
However, plenty of alternatives to the "Big 10" banks offer comparable services for significantly fewer and lower fees. You may not know about them because they lack the marketing and advertising resources of the biggest competitors. That means they're hungrier for your business and will give you a deal to get it.
It's Easy to Comparison Shop
Here's a quick way to check your options: Click on Bank Rate Monitor for the rates and fees charged by banks in your area for a range of financial products, from checking accounts to mortgages.
If you live in Atlanta, for example, interest checking will cost $30 a month at Wells Fargo (WFC) or zero dollars at FNBO Direct or Charles Schwab Bank (SCHW). Three other local banks offer interest checking at about half the cost of the big national banks listed.
You also could pay $2.95 for getting cash at an out-of-network ATM -- or pay no surcharge -- depending on which bank you choose. The interest rate on a home equity loan could be as low as 3.75 percent, from the Pentagon Federal Credit Union, or as high as 6.68 percent, from Bank of America (BAC). Your interest rate on a one-year CD can be as high as 1.10 percent or as low as 0.1 percent.
The raw numbers aren't the only factor to consider. Look at JDPower's latest rankings of consumer satisfaction in their banks, broken down by region. It's based on responses from 80,000 customers, who rated services, fees and products.
Despite years of consolidation, with the big banks growing ever bigger, you'll find a wide variety of choices. These include:
- Credit unions. A credit union is a financial services cooperative owned by its customers. Fees tend to be significantly lower, because it's a not-for-profit that exists only to serve its depositors, each of whom is a shareholder. Historically, membership in a credit union is open to people with a common interest -- members of a union, employees of a company or worshippers at the same place. But many are open to an entire community. The National Credit Union Administration research tool can help find a credit union that is open to you, and a locator shows its branches.
- Regional banks. As its name suggests, a regional bank offers its services in one state or region. Lacking the enormous customer base and marketing budgets of the big banks, they have to work harder to keep customers and attract new ones. The JDPower.com rankings are a good place to start your search.
- Community banks. Like a regional bank, only smaller. A community bank earns its profits and its reputation on local services and investments. By definition, it is independently operated and has assets under $1 billion. The Independent Community Bankers of America locator can identify community banks near you. You might be surprised at the choices. A search for Philadelphia turns up 20 choices with branches in Center City.
- Virtual banks. A virtual bank has no physical presence anywhere. If you never go inside a bank and prefer to use a banking app, direct deposit and electronic bill payment, this could be your low-cost option. By eliminating brick-and-mortar branches, most virtual bank can offer free checking and no ATM fees. As always, you need to read the fine print. A virtual bank has to make real profits. Check to see if they're making up the difference by charging high fees on debit cards or other services that you user regularly. MyBankTracker.com lists online banks.