Alternatives to Big Banks

Customers looking to make a change should consider credit unions and online banks.


Bank of America and Citibank are just the latest banks to announce new fees to help juice up their profits. While I don't begrudge them trying to replace lost interchange fee income, I understand the public's scorn over their latest move to nickel and dime their way to healthier profit statements.

That said, there are a lot of options out there for customers looking to make a change. There are plenty of financial institutions happy to take your money and not charge you for the right to access it. Some, if you're especially nice, will even give you a modest return on those savings.

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Here are just a few options available to almost everyone:

Online Banks. Online banks with high-yield savings accounts and certificates of deposit offer a one-two punch that brick-and-mortar banks find difficult to beat. Online banks offer a higher interest rate because they have lower overhead. No branches mean no lease payments, no tellers and bank managers to pay, and a smaller electricity bill at the end of the month.

Many online banks also offer checking accounts as well, which come with ATM access. These checking accounts often offer free ATM access, reimbursing you any out-of-pocket fees you may pay should you use another bank's ATM. For example, Ally Bank's checking account reimburses all ATM fees. They do this because they don't have ATMs.

The main downside, and banks are moving to address this, is that you need to mail your checks in. Without ATMs or branches, there is no place for you to make a deposit. Some banks offer the ability to deposit a check if you mail in a scan of that check, made possible by the Check21 Act.

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Credit Unions. Another good option is a credit union. Credit unions have become more popular as people look to move away from the "too big to fail" banks. Credit unions offer better rates because they aren't always looking at the bottom line. At a credit union, the owners are the depositors and so profits are returned to customers in the form of better rates and, sometimes, a special dividend.

The downside with credit unions is that they, by law, have membership requirements, but those are usually easy to overcome. Membership has to be restricted and it's typically based on employment, geographic location, or some other sort of affiliation. Most credit unions will be able to help you figure out a way to join if you want to. Another negative is that since they are usually smaller, they won't have as much of a geographic footprint. They mitigate this by joining ATM networks but you will usually have to plan ahead to get to an ATM you can use without paying a fee.

If you're looking to make a move away from a big bank, especially one looking to introduce new fees, take a look at a local credit union or an online bank.

Jim Wang writes about personal finance at When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.