Today Stephanie was in meetings all day out of town and now she is driving back. Unfortunately, driving and writing a blog is difficult, dangerous and generally frowned upon. Hence, another guest blog from the infamous husband.
As you might know I am also a finance professor and my research deals mostly with credit markets and financial institutions. I, too, get to be on television once in a while, however it seems that I my opinion is only sought when something bad happens. So, if you see me on TV you can be sure that we are experiencing another crisis in the financial markets. Back in the Fall of 2008 I got to be on TV a lot, because a lot of people were worried about their money and particularly the safety of their bank deposits. Things have gotten much better since, but there are some lessons to be learned on how to deal with your bank.
First, due to deposit insurance your bank deposits are safe up to $250,000. Even if you hear bad things about your bank, you really do not have to worry about your money. As a matter of fact, the worst thing you can do is withdraw your money. That makes things even worse. I always recommend a simple test. Go to an ATM machine (that is not your bank’s) and try to withdraw money. If you are able to do that, you have nothing to worry about. Deposits at banks that have deposit insurance (look for the FDIC logo) are safe. Most of the time when a bank goes under it is taken over by another bank. So the only thing that will change for you is the name of the bank on your account statements and your debit card.
Second, you do not have to keep an account at a bank forever. Banks rely on the fact that customers are reluctant to move their accounts (especially checking accounts). Due to new regulations some banks will try to pass some of the costs on to their customers by implementing new or higher account fees. It is assumed that a $5 monthly fee won’t make anybody move their accounts. However, there are banks (and don’t forget credit unions) that will still offer free checking accounts (most of the new regulation only affects really large banks). If your bank imposes new fees just move your accounts. Banks sell a service just like any other businesses, so if you do not like the price, go some place else.
A lot of us look at banks as some special entity that operates in a different sphere and should not be messed with. If you remember that a bank is just a business like any other and if you treat it like this, you will realize the benefits of shopping around for the best deal and leaving the bank if you are not happy with it. They need your deposits just as much as you need a checking account to facilitate your monetary transactions, so hold them to the same standards as any other business you deal with.
Stephanie will be back tomorrow with, I am sure, a much more interesting blog.