Friday, December 9, 2011
I decided to leave my big national bank and move to a local credit union. It was not easy. Here are some tips on how to do it.
First though, why do this? There are many reasons, but the main one is that the big banks don’t play fair. They are hoarding trillions in cash but refuse to make loans. Why? Because they do not want to properly value the mountains of bad mortgage derivatives they still hold from the financial crisis, because if they did that, it would be obvious that they are virtually insolvent. So they would rather perpetuate the national housing crisis than write down their own profits.
Secondly, most are indeed virtually insolvent. I had serious concerns about my big bank, which keeps announcing cutbacks and layoffs. Just because they are called “too big to fail” does not mean they are too big to fail.
Third, fees keep creeping up and service keeps declining. My bank told me the only way I could retain my no-fee checking account was to go 100% e-banking, totally online, which was fine with me, but they also said I was no longer welcome in the lobby of the bank and if I ever talked to a live person in the bank, I would have to pay a fee. Friendly!
Next, their software has become unstable. Several times I have been locked out of my accounts because of faults in their software that suddenly does not recognize me or any of my credentials. When I call the 800 number, the agent knows nothing can do nothing. Usually after a couple of days, the software rights itself and I can bank again. A financial institution must NOT have unstable software.
Next, I think it makes more sense to support banking in my own community instead of financing fat bonuses for parasites in New York.
I’ve been thinking about changing banks for a long time, but the Occupy movement convinced me to finally do it.
So here’s how it went.
1. The first thing is to write down all memorized passwords, pins, user ID’s and so on that you use at the big bank. Hide that scrap of paper in a secure location. You do this because the changeover to the new bank can take up to two months and you will forget all those secret codes as you develop new ones at the new bank.
2. Find a community bank you can work with. I surveyed several credit unions in my city for availability of branches near me, no-fee checking, ATMs and other services I need. I visited three of them. In two, I couldn’t get anyone’s attention. If you walk right up to a teller, the teller cannot open a new account and will only refer you to a “manager.” But the closest I ever got to a manager was a clerk who handed me some brochures. At the third CU, there was a greeter at the door who welcomed me and made an appointment for 5 minutes later with an appropriate manager.
3. Read the financial statement of the new bank. This is available in the lobby, or you can ask the manager for it. Just check the balance sheet to see if they are making money, not deeply in debt. If you don’t know how to read it, get a friend who does. Make sure your deposits are insured by the appropriate federal agency for that type of institution.
4. Verify that the new bank offers the services you need at rates you are willing to pay. My new CU has virtually free checking, savings, home and car loans, and they sell some kinds of insurance. The checking is “virtually” free because you must maintain a $25 savings balance to make the checking account work, so that is basically a one-time charge for opening a checking account, okay with me.
5. Open a test account with a minimal balance, just to see how the paperwork goes. I opened an account for a hobby that generates about $20 a month in deposits. With such an account, you can test the bank’s bill-paying software and other online services, get some checks printed, and you can try their ATM network. Most credit unions have collaboration agreements to honor each other’s debit cards, so even though the small bank has far fewer branches and fewer ATMs compared to the big bank, the collaboration makes a virtual network just as functional. Some of the participating credit unions charge a small fee for using their ATM with another bank’s card, but many do not. When you’re traveling, you can use the network, or use the old grocery store trick to get cash (pay with debit card and ask for cash back). The big stores will give $100 with no question.
6. Make sure you have enough money left in the big bank to pay a month’s worth of bills while you transfer your direct deposits over to the new bank.
7. If you have a credit card with the big bank, stop using it and start using a new credit card, either from your new bank, or from an airline, or somewhere else. If you have investment accounts, your new broker will roll them over. The new broker might be at your new bank, or be an independent broker, even an online service such as Fidelity or Vanguard, etc. If you have loans with the old bank, the new bank will help you move them over.
8. If all has gone well, open another account at the new bank to handle your main financial transactions (or just use the hobby account if you didn't really need it for that), then acquire and fill out the forms necessary to arrange for direct deposits to the new bank. You get direct deposit authorization forms from your employer, your pension manager, investment broker, social security, whatever. Send those in. Let a month to six weeks go by until you are sure deposits are going to your new bank, not your old bank.
9. While you are waiting, begin documenting your payee information for the new bank. You will find that the old bank will not reveal your payee information to you, because that is one way they make it difficult for you to leave. So when a new bill comes in the mail, or comes due online, write down all the information you need to pay it, including account number, the full address of where the payment goes, the customer service phone number, everything. Then you can enter that information in the new bank’s online bill payer service. Keep the written copy because the new bank probably will also hide most of the information from you (it’s a common bank strategy).
10. As direct deposits come in to the new bank, use them to pay whatever payees that you have set up so far online at the new bank, to make sure the bill payment system is working right. If you have authorized some creditors to debit your account directly, you need to contact them and change the debit to the new bank. Until all the deposits are finally coming in to the new bank, pay the rest of your bills out of the old bank until it is out of money, which will be after all the direct deposits have switched over to the new bank. Eventually, you will have transferred all your deposits and all your payees to the new bank.
11. Use your new bank account to pay off the balance on your old bank credit card, or, if you can’t do that, transfer the balance to the new card.
12. When all is good, write a check against the old bank to zero out the balance and deposit it in the new bank. Be sure to get an accurate current balance at the old bank, net of any fees. You can do that at their ATM. After that check clears, notify your old bank in writing or email that you are closing the account. If you fail to do that, they can continue to assess fees on you and when you don’t pay them hassle you and your credit rating. You can just cut up your old bank credit card or you can call the 800 number and cancel it. (cartoon soxfirst.com)