CONSUMER REPORTS: The lowdown on four alternatives to big banks
Remember Bank Transfer Day two years ago? That’s when mad-as-hell consumers were supposed to bring giant banks such as Bank of America, Chase and Citibank to their knees by moving their money to nonprofit credit unions.
It was a bust, says Consumer Reports. Few people switched, in part because of the grip big banks had on them with their alluring online and mobile banking services.
Now the top 10 credit unions have caught up, and new competitors have entered the fight for your dollars. Here’s the lowdown on four alternatives worth considering.
Why? They offer all of the services of a bank (and federal deposit insurance) but tend to charge considerably less for checking accounts and loans. And they generally pay higher interest rates on savings.
Why not? The customer-satisfaction rating for credit unions dropped 5 points last year, to 82, according to the American Customer Satisfaction Index (ACSI), which tracks 48 industries. Nevertheless, they still outscored Chase (74), Citibank (70) and Bank of America (66).
Where to find them. Membership is open only to people in a specific group, such as employees of a company, members of an association or residents of certain communities. Go to mycreditunion.gov to find prospects near you.
Why? If you’re uncomfortable cutting the cord to a traditional bank, check out a regional or midsized bank. They now offer the same technological bells and whistles but also provide significantly higher satisfaction than the four biggest national banks, according to the ACSI. Their satisfaction score was 79 last year, placing them below credit unions but above the big banks.
Why not? Smaller isn’t always better. In Texas, Regions Bank ranked last among 13 banks assessed in J.D. Power’s 2013 Retail Banking Satisfaction Survey. That was worse than Wells Fargo, Citibank and Bank of America, though Frost National, another regional, topped the Lone Star State list.
Where to find them. Go to jdpower.com for rankings of regional banks serving your section of the country.
Why? They typically charge no monthly fees, have low penalties or none at all and offer FDIC insurance, direct deposit, electronic bill payment, debit cards, photo check deposit and national networks of fee-free ATMs.
Why not? There are no physical branches, which might be unsettling unless you’ve embraced mobile banking and rarely need to set foot inside a branch. Plus the low- or no-fee business model might be jeopardized at some virtual banks that partly finance their operations from the fees they collect every time a customer uses a debit card to make a purchase, because in July a federal court ruling signaled that those fees might be regulated lower.
Where to find them. Search online for virtual banks including Ally, Capital One 360 Checking, GoBank and Simple.
Why? Once a high-priced option for low-income consumers who couldn’t qualify for a checking account or credit card, prepaid cards have moved into the mainstream and offer many of the features of a checking account. Almost all of them come with FDIC insurance. And when Consumer Reports rated 26 cards in July on value, convenience, safety and other measures, it found that consumers could avoid the few fees that the best ones had.
Why not? All prepaid cards aren’t created equal. And while Consumer Reports’ Ratings didn’t compare the cost of checking accounts vs. a prepaid card alternative, it did find that the worst prepaid cards have high, unavoidable charges, including activation and monthly fees, and that one lacked FDIC insurance.
Four prepaid cards to avoid: AccountNow Gold Visa Prepaid Card (MetaBank), Reach Visa Prepaid Card (Tom Joyner), Redpack Mi Promesa Prepaid MasterCard and American Express for Target.
Where to find them. Consider the best Consumer Reports found: Bluebird with direct deposit (American Express), H&R Block Emerald Prepaid MasterCard, Green Dot Card (Green Dot Bank) and Approved Prepaid MasterCard (Suze Orman) with or without direct deposit.