Felix Salmon points us to Arianna Huffington’s campaign to get people to move money out of the big four banks: JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. (Over at Wells, which was “just” a $600 billion bank until it bought Wachovia, they must be wondering if it was worth the headache.) She suggests community savings banks here; Salmon suggests credit unions here; Uncle Billy also suggests credit unions here.
Salmon is skeptical that it will work, because changing your bank is a pain. I can testify that it’s not a lot of hours of effort, but you can’t just sit down and do it in one shot; for example, you need to request direct deposit forms (often paper) from your employer(s), get them, print them out, often mail (!) them somewhere, then check your bank statements periodically to make sure the switch happened. Then there’s the issue that if you go a month without direct deposit many checking accounts will charge you a fee, which creates a problem when switching. (However, at my Bank of America account, even without direct deposit you can avoid a monthly fee by keeping a $1,500 minimum balance.) Killing automatic bill pay and setting it up in your new account can usually be done in one sitting, although you have to remember that some of those payments are initiated by your bank account and some are initiated by the payee. So it’s doable, but it’s a pain.
I think another issue is that while outrage at Wall Street remains high, most people don’t connect the bank in their town with Wall Street, even if it is a branch of Bank of America. When you walk into a Bank of America branch, it doesn’t feel like Wall Street. It doesn’t even really feel evil; it just feels ugly and corporate and inefficient. I suspect it’s still a mystery to many people how mortgages issued by the bank on the corner are connected to CDOs, the housing bubble, and vast trading profits on Wall Street. My hatred of Bank of America is mainly due to the experience I had with them last summer trying to get old bank statements for a client. (I also recently noticed that while there used to be three Bank of America branches in my town–probably because Fleet, which B of A bought in 2004 or so, was itself the merger of three banks–now there is only one.)
That said, I’m all in favor. I recently canceled my Citibank credit card that I had for twelve years (my remaining cards are American Express and U.S. Bank, which isn’t particularly virtuous but at least avoids the big four), and I only have one step left to close my Bank of America account (need to verify that my last direct deposit has switched). I use Greenfield Savings Bank (0.75% on checking, without the hassle of a “reward” checking account) and Peoples Bank (1.5% on savings, and other banks’ ATM fees refunded for checking accounts). (For those in Western Massachusetts, I hear Florence Savings Bank is good too).
Switching banks can also be good for your wallet, since the biggest banks almost always pay the lowest deposit rates (and charge relatively high mortgage rates). I look at Bank Deals when I’m looking for a new account.
Maybe next Arianna Huffington can get everyone to pull their money out of actively managed mutual funds and send it all to Vanguard. Now that would be good for everyone (except a few fund managers, of course).
By James Kwak