By Thomas Kostigen
There is a growing movement to get people to switch their banking relationships from large, corporate financial institutions to small banks and credit unions. Why? The “Too Big to Fail” attitude of large banks that comes with risky lending, investing, and sometimes poor corporate governance practices is a turn off to many customers seeking a more personal approach with their money.
Oftentimes community banks and credit unions will take a wholistic approach to banking and lending. Small businesses too can benefit from a banking relationship that counts other factors besides dollar signs and credit scores when working with clients.
Earlier this year the Move Your Money project was begun to help people make the transition from big banking to local banking. It has a resource page where people can find a local bank or credit union. And it has launched a campaign that encourages individuals and institutions to divest from the nation’s largest Wall Street banks.
It says, “Smaller financial institutions are typically more conservative about how they manage their money, they’re more closely connected to the people and businesses who live near them and they’re more inclined to make loans they know will get paid back. In other words, they have the values that more people would want banks to have. Plus, they tend to have fewer fees and offer better returns for consumers. It’s neither a conservative nor liberal idea; just a way for individuals to vote with their dollars and create a better financial landscape.”
Arianna Huffington, Bill Maher, Michael Moore, Alan Cumming and numerous other celebrities and politicians have endorsed the idea. Whether or not you should move your banking relationship is a big decision. And a good financial advisor can help you decide whether indeed a small bank is better for your needs.
While perhaps offering more personal banking relationships, small financial institutions often lack many of the services offered by big banks such as stock trading, access to alternative investment products, ATM access, digital banking, overseas customer service, and more. Still, want people may not need bespoke trading nor sophisticated banking advice.
In fact, millions of banking customers moved their money out of big banks after the 2008 financial crisis. And a JD Power and Associates survey revealed that almost two-thirds of consumers would consider leaving their bank.
GreenAmerica, a nonprofit that works to create a more socially just and sustainable society, lists a number of reasons for big bank customers to leave, including:
- They may invest your money in industries you don’t support, like fossil fuel projects, military development, or abusive sweatshops.
- Mega-banks lent billions in predatory sub-prime mortgages that their borrowers couldn’t repay, which lead to the housing market crash in 2008.
- They don’t treat people right. There have been thousands of complaints per year against mega-banks for bad credit card practices, scams, and fees.
- Mega-banks have been required to repay hundreds of millions of dollars wrongfully taken from consumers.
Local banks, the organization says, support local jobs, exhibit more accountability to their shareholders, members and customers, provide services to low income individuals and families, and more often support clean energy, fair labor, and food security in food deserts.
Changing banks is a big deal. In many cases, it seems, there are better deals to be had.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
