Cramer: Play Small Ball, Part II: Working with Community Banks

Last week I wrote about the benefits of working with smaller banks.

Mostly, I talked about the advantages of face-to-face customer service, the opportunity to negotiate lower fees, and increased odds of getting better deals on bigger loans for things like cars and real estate. Small banks are all over the place. Right now, there are 8,500 community banks, including commercial banks, thrifts, stock and mutual savings institutions, with more than 50,000 locations across the United States. Small banks have a wide range of assets, too, ranging from under $10 million to several billion dollars.

The ongoing research on small banks that I’m seeing is revealing. Almost unanimously, people move from big banks to small ones over key issues like customer service, overdraft fees, and that bad mojo from big banks that I’ve come to call “institutional arrogance.” In study after study, big bank customers believe they’re just another number to financial giants. Small banks, the research is showing, have a good opportunity to bring more customers into the fold, if they can bring good service and good deals to the table.

But the first “Small Ball” column focused on those potential benefits, and not actual advice on how to work with a community bank. And I always say that on MainStreet, just like  on BankingMyWay, you’re going to get the whole package – not just the pros and cons of working on a personal financial issue, but how to get the best deals, and how to get the job done, too.

So let’s take some time to today to address a battle plan when you switch from a big bank to a small one.  We’ll take it one step at a time.

1. Make the switch – The good news is that switching banks accounts, even to the smallest of community banks, is easy.  The whole process shouldn’t take more than 10 minutes, and your new bank does most of the work.  Start by reaching out to your bank, either by dropping in for a face-to-face visit, or by calling them on the phone. Most small banks have online customer service options, as well. Your new bank will want the name of your old bank, and your old bank account number. You’ll need to provide two forms of ID, and quite possible your Social Security number (make sure that if you switch accounts online, your new bank has encrypted security so any personal financial data isn’t exposed to identity theft).

2. Watch out for transfer fees – Another tip: make sure that your new bank covers any overdraft fees, or other potential transfer fees when your money switches accounts. Banks call these ‘switcher” fees, and a good bank will cover any costs associated with transfer overcharges, if they arise.

3. Ask for freebies – Don’t ask for that new toaster, but do ask for any financial-freebie your new bank is offering (often it is cash or a deal on a loan). After all, it can’t hurt to ask and you can usually get something for bringing your business to a small bank. That said, what this country really needs are more banks where you deposit a toaster and they give you $300 in return. That’s the Cramerican way.

4. Chuck the savings account and think CD’s – Smaller banks have a reputation as focusing on small-bore savings accounts for their customers. But that’s a fantasy, akin to the Easter Bunny or the ability of leprechauns to locate gold. In reality, smaller banks do a good job of offering good CD deals. Many pay more than 2.5% on three-month CD’s (and much more on longer CD’s), as opposed to 0.2% or 0.3% on savings account rates. To find out how your local banks stack up on CD rates, visit BankingMyWay.