Glink: Think Twice Before Ditching Your Bank

Christine Benz: Hi, I'm Christine Benz for Morningstar.com.

With many of the big banks layering on new fees or increasing their existing ones, many consumers are shopping around for cheaper options.

Here to discuss some of the key factors to consider before dumping your bank is Ilyce Glink; she is a syndicated financial columnist.

Ilyce, thank you so much for being here.

Ilyce Glink: It's a pleasure.

Benz: So Bank of America started this whole thing by saying it was going levy this $5 per month fee on debit card users. What are some of the key fees that are being assessed, new fees or maybe additions to existing ones? What's the landscape right now like?

Glink: That Bank of America $5 a month debit card fee for its 37.5 million users just seemed so enormous and so draconian. You are talking about $60 a year. Credit cards are free. I mean you have to be able to get one, of course.

But that just seemed--it seemed like a very ill-timed announcement. It came right on the heels, the week after or the day after the government's new rules went into effect limiting how much card issuers can actually charge merchants. And so, it looked just like a payback, right? "Well, if we can't get the money from the merchants, we'll get it from consumers." The National Foundation for Consumer Credit just issued a new survey announcing that the vast majority of consumers were ready to vote with their feet and leave a financial company, if they were going to charge those kinds of rates, and I think all of the industry, the banking industry, was pretty surprised at the vehemence.

Now I know behind the scenes all of the big banks have been testing this. Chase had been testing $3 a month fee. You had Wells Fargo testing fees, and they weren't doing it all over the country. Just Bank of America was the first one to announce it. So they were the ones who got slammed.

Now I am told, Chase is going to back down, Bank of America is backing down, and everything is going to be normalized. But it's interesting that none of them, I guess, tested or did the right focus groups with consumers to learn how upset people would be.

Benz: So assuming that you are fed up with your bank for whatever reason--whether a debit card fee or there are some other smaller fees that you're seeing starting to appear--what are the key factors you should bear in mind if you are trying to comparison shop, compare what you've got with your current bank, versus some other options that might be out there?

Glink: Well, it's interesting. It's multi-faceted. There is no one solution for anybody, because some people may have a lot of cash, and then they won't pay fees. Some people won't have any cash, but they have a lot of different kinds of accounts--they have become a very profitable customer for a bank. So I think the first thing you have to do is take an assessment of where you are. What kind of cash do you have, how do you actually use the different accounts you have at a bank? Are your accounts spread out or can you aggregate them together?

Benz: Are there benefits to doing that?

Glink: Absolutely. I mean, if you can link accounts, typically fees go away, because you become a more valuable customer. In fact, it's a little like shopping around for insurance. If you could put auto and health and life and ... homeowner's insurance or renter's insurance, if you can put all of those together, you get a much bigger discount across the whole divide. Same thing is true when you get to banks.

But there are other kinds of fees involved as well. Like, for example, I was looking at my own online bank account this morning. I wanted to pay a vendor, and I have well over a 100, maybe even 200 companies that I have done business with over the last five or seven years. So if I decide to switch banks for my business, or even my personal accounts, I would have to take all that information and re-enter it into the new payroll system, and that's going to take a significant amount of time. I have I don't even know how many accounts that auto-debit or auto-deposit into those accounts. Those all have to be changed, and you can't forget or you could wind up missing a mortgage payment or missing a credit card payment.

So I think people underestimate what value their time has, and they forget to kind of look at all of these different facets before they go ahead and they say, "I am so mad. I'm just going to leave."

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Benz: So logistical headaches that could be created by switching banks. So in terms of assessing specific fees, debit card fees are front and center for many people right now. Low account balance fees. What other fees should people have in mind when they are assessing a bank?

Glink: I never want to see anybody bounce a check. But not-sufficient-fund fees are now at a record high, ... I think the last Bankrate survey was literally on the order of $34 or $41 for a non-sufficient-funds or a bounced check fee.

You're seeing ATM fees at an all time high as well. Where are the ATM fees? If you go with a bank that's kind of a stand-alone bank, and it doesn't have any branches nearby, and you end up paying $2 to $3 every time you take $20 out of the till, that's a huge tax on what you're doing.

Some checking accounts now have fees. We've been hearing about how we're going to see the end of free checking, and if you don't have an end to free checking, well that means that you've got a lot of money to sit in account that's not earning any interest, or you've got other kinds of assets at the institution.

So again, you have to kind of look to your own personal portfolio, and then see if it matches up well with the bank, and then call. I find that if you call and you say, "Look, I have been a customer for 20 years. I have these three accounts. You now want to assess me $20 a month for this account, or $10 a month, or $5 a month--whatever it is. I don't really want to pay it. What can you do for me?"

Benz: Will they work with you?

Glink: Customer retention. It costs a lot to find a new customer, and if you're a profitable customer for them, you've got all kinds of accounts with them, they should work with you to find a solution in their array of solutions, that's more customized.

Benz: So you think that's worth a try--call your existing bank and see what they'll do for you?

Glink: Do every single thing you can to avoid moving. Once you decide to move--and let's say you can do it. You get a much better deal across the street. I wouldn't cross the street for $25, but some people would. Oh, you're opening an account with us, $50, OK. So you have to decide. Once you have made that decision, now you've got to shop around for a bank.

And I think that people shouldn't just look at the big bank across the street that may or may not hold the right options. I think you should really shop around, like I suggest people do for mortgage. Take a look at a credit union; take a look at a regional bank. Regional banks are desperate these days to attract depositors. They have been overwhelmed with bad debts. They are looking to build up their cash core. They have some attractive stuff going on.

So, credit unions, regional banks. I would look at a big bank, and I would look at an online bank. I recently put some money into Discover Bank. They are paying a better rate of interest, it's money I don't really need. It's not my day-to-day bank. I also have a Discover Card. I have all the credit cards actually. But it just seemed like, "Oh, this is a good option as well."

So you look at a Discover Bank or an ING Direct--their Orange accounts are good. I think there are a number of these online banks that have sprung up.

And then for some people, there is a bank called PerkStreet. It's based in Boston. I have actually met the guy who runs it, and they are offering cash back on debit cards. So, to the total opposite of what the big banks are doing, these guys pay you 2% every time you use a debit card. So if you are a Dave Ramsey kind of a person, then you are all about the cash, and this is a company that you could open up a cash account in; there are no fees; they pay you cash back for a debit card. Maybe that's the right answer for you.

So, I think that there is a wide range of options these days, and if you don't explore them, you won't see what's best.

Benz: So, Ilyce, you mentioned a couple of options that don't have necessarily bricks and mortar presences. So the credit unions maybe don't in your geography, and certainly the online banks. Should people feel any trepidation about opting for a bank like that or a financial option like that?

Glink: You know, a lot of these banks are starting to adopt really interesting technology. And you've seen it with Chase. So Chase has a lot of brick and mortar stores. I must have walked by three of them on the way here today. They're everywhere.

But they have adapted really interesting technology, where you literally hold your check up and take a picture of it, and you can deposit your check, simply by taking a picture of it and that goes through the system.

A lot of these online banks are now taking technology like that and applying it. So, I can't remember, honestly, our personal checking is at one of the big banks. I have been in one of their branches in maybe 10 years, because I don't need to anymore. And the same thing is true even for my business account. I go into deposit stuff sometimes, but I don't have to.

A lot of these online accounts are so clever about the way you can move the money around, use ACH transfers.

Benz: What are those?

Glink: ACH is Automated Clearing House. The Federal Reserve does the check processing in this country; they also provide the automation for basically--it would be like a wire transfer. So bank institution to bank institution payments, electronic payments. So, they are so clever with that how they deposit money just by simply using your camera, which everybody has in their phone these days, that you are able to, I think, get away from needing to have a branch.

So there are reasons to think outside the box. For example, let's say you want to join a credit union. Well, Delta Credit Union, which is based in Atlanta, where Delta is headquartered, was one of the first in the country to open up its door: Anybody can join the Delta Credit Union.

Benz: So how about ATMs, though, if you are using a credit union or online bank, will you pay outside fees?

Glink: Well, it's a great question. Some you do; some you don't. You really have to look at it. A lot of times, they become part of either the Star network or you'll see the Cirrus network ... and then you can use those terminals for free. If you go outside of those, then you would pay a fee. Sometimes, if you're in Las Vegas at a gambling table, no matter where you are, you're going to pay a fee.

So you have to be thoughtful, again, about what network are you on. And these are really important questions to ask from the get-go, so that you don't get surprised after you've made the switch.

Benz: So Ilyce, any final tips for people who are thinking about swapping banks?

Glink: I don't think it's an easy decision anymore. What ends up happening is people get angry, and when they get angry, they make bad financial decisions. So your bank sends you a note and says, "Starting next month, every time you use a debit card, we're going to charge you $5 or $3 a month," you're going to get angry. You are going to rip it in half, and you are going to say, "I'm done with this bank!" And it's really the wrong approach. They are not doing it personally. I mean they are doing it to make their shareholders and Wall Street happy, or at least happier than they have been. But you have to think it through logically, and I think if you can take out a piece of paper and dispassionately write down how many people you have in that Rolodex, the online Rolodex that you pay, how many accounts you have that are direct deposited. If you can't remember, look over your statements over the last few months. You have probably got work; maybe there is something else that gets deposited. I know for somebody like me, so many companies pay me through direct deposit now. If you are in social security, you only have until, I think, 2013, and the government is going to pay everybody by direct deposit. So maybe you're already getting it direct deposit. Your tax return may come that way. You just want to make sure that you've tied up those loose ends.

Then you want to look at what accounts do I have there? Is there a way for the retention department to actually keep me? Is there any other account somewhere else? Sometimes we collect accounts over the years. You can get 10 statements every quarter, and you realize, "Oh, I forgot I have $50 there. Why I do have $50 there?" Well, can you move those funds over? Is there a minimum threshold? Can you add different kinds of accounts and will that make a difference? I think all of those go into making a rationale decision, and you should have a pretty decent-sized page, and then say to yourself, "All right, now I'm going to pick up the phone, and I'm going to see what they can do for me."

Benz: Well, Ilyce, thank you so much for sharing these insights, very, very helpful.

Glink: Happy to do it.

Benz: Thanks for watching. I'm Christine Benz for Morningstar.com.