Who's Afraid Of The Big Bank?

No service, rock-bottom interest, and sky-high fees.

If you have had it with your big corporate bank, you are not alone. According to a national survey conducted by the American Bankers Association, there has been a steady decline, overall, in customer satisfaction.

So what can you do about it? Saturday Early Show Financial Adviser Ray Martin has some suggestions.

Over the past four years, consumers have seen nearly 2,000 banks merge. When banks merge, they typically reduce the customer service staff to cut costs. They also start charging new and higher fees.

Many big banks now limit the number of free checks consumers can write each month or the number of free withdrawals they can make. Monthly fees on interest-bearing accounts have increased and fees for bounced checks have risen industry wide. Remaining one of the most nettlesome bank fees is the ATM surcharge.

Four tips for better banking:

1. Consolidate spending on charge or debit cards. This will give you only one bill, so you write fewer checks. By cutting down the number of checks you write, you can avoid check fees.
2. Use a money market fund. Avoid low interest on checking or savings. Many banks give you a checking or saving account with very small interest rates. Refuse the savings account. Ask for a money market fund, which can pay 5 percent interest. It's not a CD, it's not insured or guaranteed, but it pays twice what savings accounts do. It's a good place to keep cash and earn interest.
3. Plan cash needs ahead. To avoid withdrawal and minimum-balance fees, don't let your balance drop below the minimum. If you get freebies, that saves you a lot of money. Planning what you'll need ahead of time protects you from accidentally falling below your bank's minimum and getting charged fees. This also will help you control ATM withdrawals.
4. Consider banking alternatives. Institutions like credit unions, smaller banks, and online banking are interesting alternatives to big banks. Your financial needs will help determine what type of bank is best for you.

1. Credit unions
   
2. Small community banks
   
3. Online banking

Join a credit union through your company, a professional group, or an organization that has set one up, such as a church. Also, the Credit Union Membership Access Act (1998) allows you to join a credit union if a member of your family belongs to or is eligible to join one.

Credit union advantages:

• Emphasis on personal attention.
• Low rates on most loans. They are able to offer attractive rates because they're cooperatives owned by their depositors and are not for profit. As such, they return their earnings to their members in the form of competitive ricing.
• Low minimum balance and low fees. Not only do credit unions frequently have lower minimum balance requirements for avoiding fees on checking and savings accounts than banks -- sometimes they have none at all. The average cost for a bounced check is $12, about half of what banks charge.
• High-interest deposit accounts. Credit unions typically offer the highest interest rates on certificate of deposits checking accounts and the lowest rates on loans and the smallest service fees.

• Fewer branch offices and less access to ATMs.
• Limits on commercial loans, no more than 12.25 percent of their total assets. So if you want to start a business, you might have to look elsewhere.

Community banks generally pride themselves on their accessibility to the customers and their loyalty to the neighborhoods where they do business.

Community bank advantages:

• High on personal attention.
• Often have better deals than larger competitors and require less money deposited.
• You can avoid the monthly fees with a smaller bank. Most importantly: Small community banks don't usually charge an ATM fee.

• If you travel, you can get hit with surcharge access fees.
• There is also the chance your small community bank will be absorbed into a big bank. Five years ago, big banks were on the prowl for acquisitions. Today, they tend to ignore small banks. Small banks typically buy other small banks and remain community focused.

There are two types of online banking: your current bank's online account and an Internet bank.

You can use your "bricks and mortar" bank's online service; call it "bricks and clicks." If you have access to the Internet, you can perform many functions online -- check balances, transfer money between accounts, and pay your bills. It's about conveniences.

A cyber bank, on the other hand, is solely an online banking institution. There are now about 50 cyber banks from which to choose. They are fully regulated financial institutions that exist solely on the Internet.

Virtual banks offer interest bearing checking accounts with low or no minimum balance or fees and typically pay better rates. The average yield on a checking account, for example, is 3.58 percent, compared with 1.7 percent traditional banks offer, according to an October 2000 survey.

Drawbacks to cyber banks:

• Impersonal
• No actual branch. You still have to visit a bank to get hard cash, unless you have direct deposits. You send your deposits to a central location by mil, and your money will take longer to become available.
• Virtual banks don't own automated teller machines. Customers must use other banks' ATMs and incur charges. (Some virtual banks will absorb the fee for a certain number of withdrawals.)

© MMI Viacom Internet Services Inc. All Rights Reserved