Debt, Credit Card & Consolidation Current News Digest

If you take the 120 minus your age investment allocation rule to towards retirement, the conclusion is that your investments should mostly be in safe “bond” investments and out of risky “stock” investments. Since you no longer have the time to wait out the volatile swings of the stock market, you are advised to be invested in “fixed income” investments, like bonds.

Unfortunately, even with all the strategies below, nothing replaces the dependability and safety of a high yield savings account. The days of exceptionally high yields protected by FDIC insurance are gone until we see the stock market reach its once lofty heights but hopefully some of these strategies can bridge the interest rate gap without introducing too much risk.

Fixed income investments are usually safe investments that give you a fixed rate of return. The safe part is really a relative term, as bonds are only as safe as the ability for the bond issuer to pay the fixed interest rate. The idea is that you pick stable companies or municipalities and you have a reasonable expectation that the interest will be paid. How do we use those principles to find similar “investments” to boost our savings rate?

Reward Checking Accounts

Reward checking accounts are checking accounts that offer a much higher than average interest rate if you satisfy certain conditions. You are usually required to use their debit card 10-12 times a month, use their billpay system, direct deposit your check, and sign up for paperless statements. The higher interest rate applies only up to a certain balance, usually around $25,000. They are able to offer this higher interest rate because it’s paid for by the debit card transaction fees.

How good are the rates? As of this writing, DepositAccounts.com lists the top reward checking account rate is 4.26% APY from NBRS Financial Bank for up to $25,000. While this isn’t strictly a fixed income strategy, it is an FDIC insured way to boost the interest rate on your savings.

Municipal Bonds

When your local or state government wants to borrow money, they don’t go to the local commercial bank. They issue bonds and sell them with the help of an investment bank. You can buy municipal bonds directly from the municipality/state, if you meet their minimum purchase requirements, or you can buy them on the secondary market. While there is a possibility that the government will default on the bonds, it’s still safer than a lot of other investments.

One of the benefits of municipal bonds is that the income from the bond payments are given favorable tax treatment. They are usually Federal income tax free and, if you live in the issuing municipality, state income tax free as well. Before you purchase a bond, be sure to confirm this as there are some exceptions.

Dividend Stocks

One of the benefits of researching fixed income strategies when you’re under 30 is that you’re able to take on a little bit of risk. That’s why lately I’ve been looking at dividend stocks and why I’ve been slowly accumulating shares in blue chip companies that consistently pay out dividends. You may remember the Dividend Aristocrats, companies that have increased their dividends each year for 25 consecutive years, and Dividend Champions, companies that have maintained or increased their dividends each year for 50 consecutive years, posts. Those two were written out of my interest for finding consistent dividend paying companies. It’s not a definitive list of what to buy but it’s a start.

Stocks are risky. Dividends are not guaranteed. A company like Integrys Energy Group (TEG), a dividend champion, is appealing because they offer a 6% dividend yield but remember they are still publicly traded and there’s no guarantee they will continue making payments.

Favorable tax treatment of dividends. One of the benefits of dividends is that the payments are taxed at long term capital gains rates. Whereas savings interest is taxed at your ordinary Federal income tax rate, dividends get a lower, favorable rate. For 2010, it’s 15% for those in the 25% and higher tax brackets and 0% for those in the lower brackets.

As is the case anytime you invest, and this is still investing even though it’s “safer” than buying penny stocks, you want to use diversification as your friend and always do a ton of research beforehand. You can’t predict the future but you can improve your chances through research and hard work.

Do you have any good ideas how to to tweak a few extra percent out of your savings?

(Photo: iain)

Fixed Income Strategies to Help Boost Savings Interest Rates from personal finance blog Bargaineering.com.

If you’ve decided to get your first credit card, there are a few things to keep in mind. I believe that credit cards are a great financial tool when used responsibly. So whether you’re a college student just starting to receive credit card offers in the mail or you’re seeking to build your credit history, you might find the following tips and reminders helpful as you seek your first credit card.

Things To Consider Before You Get Your First Credit Card

Here are a few things to consider before you sign up for a card:

1. Know your reasons for owning a card.
Rather than fill out applications at random, stop to consider why you need a new credit card and determine what sort of card will fill your needs. Many credit card users like to make online purchases. Others use their cards for automatically paying for their utilities and other bills. Others enjoy the benefits of a credit card rewards program.

2. Make sure you can afford to own a card.
Before you sign up for one, make sure you can actually afford to carry a card around. You should also figure out where the credit card will fit into your financial life. Be honest with yourself and ask yourself if you can afford to pay off your balance each month. How much interest are you willing to pay? Can you make the minimum payment each month?

Start With A Secured Credit Card

If you don’t have a credit history yet, it can be difficult to find an unsecured credit card. So one way to establish your creditworthiness is to seek out a secured credit card. In most cases, you’ll be required to put up a deposit, with your credit line usually being equal to your deposit.

An example of such a card is Applied Bank’s Platinum Zero Secured Visa Credit Card. Through this card, you can obtain a credit limit of $500, but you’ll have to back it up with a $500 deposit. If you don’t have $500 to start with, you can open an FDIC insured deposit account with Applied Bank with just $100, and work your way up to the $500 required balance. Other features include an interest rate of 0% APR for purchases and 9.99% APR for cash advances. And as far as fees, there is no annual fee for this card but there does exist a $9.95 monthly fee. In my opinion, I’d consider the yearly payout of $119.40 as pretty much what stands for the annual fee for this card.

The benefit of applying for such a credit card is that there aren’t requirements for credit or income, which makes it easy to become a cardholder. Also, your deposit is covered by FDIC insurance. In addition, you’ll build your credit history when the issuer reports your account activity to the credit bureaus. The downside though is that secured cards may charge you heftier fees for the privilege of using them.

Another place to search for a secured credit card is through a local bank or credit union. If you already have a local checking or savings account, stop by your branch to ask if a secured card is offered.

Credit Cards for Students

It hasn’t been too long since I walked around my college campus and ran into credit card offers aimed at students. I’m sure it’s no different now. Well, my opinions on this matter haven’t changed either. I would suggest that you do some research first before you sign up for the nearest offer.

I would look for a card that offers:

• A decent line of credit (more than a few hundred dollars)
• An interest rate that won’t penalize you (below 18%)
• Low or no annual fees
• Some type of credit card rewards program, like the Citi ThankYou Points Network.

The great thing is that there are some credit cards right now that try to encourage the development of good and healthy credit card use among students. Check out this list of best student credit cards.

Let’s take a look at the Citi mtvU Platinum Select Card and the Citi Forward Card for College Students, which are on the list. They have no annual fee, a 0% APR on purchases for 7 months and can be used as balance transfer credit cards. On top of this, you can earn reward points for being a responsible cardholder — from taking care of your card account and credit line, to maintaining a solid GPA.

Another option for students is the Discover Student Credit Card. It has no annual fee and offers unlimited rewards. If you qualify, your APR for purchases is 0% for the first 6 months; then the standard 14.99 % variable rate kicks in.

Become an Authorized User

Another way to gain access to your first credit card is to become an authorized user on someone else’s account. For instance, credit-seeking students might be able to ask their parents to allow them to become authorized users.

But here’s where I’ve seen many a debate unfold on the issues of letting younger people gain access to credit cards. In fact, we even wrote about it in this article on how credit card companies get our kids to sign up. So as a parent, I always preach caution on these matters: it’s best for the cardholders and authorized users to agree on appropriate limits for the card’s use ahead of time. Unfortunately, some families are certainly going to run into problems if their authorized users max out their cards on spring break. There needs to be consequences on the first sign of card misuse.

For those who are planning to become authorized users, be aware of what’s expected of you once you sign up for a card. You should learn how your credit will be impacted if a negative event occurs. What happens if payments aren’t made on time or worse, if they’re skipped? Be aware of how your actions (and those of others on the same credit card account) will impact your credit.

Become a Savvy Credit Card User

You’ve probably heard of consumers mired in debt which they never seem to escape from. If you’re someone still waiting to get a hold of your first credit card, you can head off future financial trouble by preparing yourself now.

Know your credit card’s limit and don’t exceed it, otherwise you’re going to run up your interest rate and incur possible over the limit fees. Also, set up automatic payments for your credit card if possible. By making it a habit to pay your bills monthly in full and on time, you’ll be able to gradually build up to a solid credit rating and score.

My final tip? Be alert for the first sign of problems when managing your credit card debt. Once you start having debt problems, be proactive and cut up your cards or freeze them. You should only be using cards if they’re helping make your financial life easier.

How To Get Your First Credit Card

We’ve covered some of the best high interest savings accounts in the past, and I’d like to add a few more savings products to the list. While I associate American Express with top of the line credit cards, they actually also have a banking arm through which they’ve been offering a couple of high yield savings account options.

So if you’re looking for a place to stash your cash, and would like to work with a familiar name in the financial space, then I’d like to point out the following Savings Accounts from American Express Bank, FSB.

Personal Savings From American Express

American Express Bank has two types of accounts for your savings. Here are some details:

#1 Online Savings Account

The High Yield Savings Account from American Express is an online savings account that currently yields a 1.30% APY, with interest compounded daily. This account does not require a minimum balance and does not incur any fees. You’ll also get 24/7 access to your account via phone or the web. And of course, your accounts are fully FDIC insured. You’ll be able to access your money through the standard methods of electronic transfer and check writing.

#2 Certificates of Deposit

The American Express Bank also offers a variety of certificates of deposit of varying terms. Just like their savings account counterpart, these accounts are FDIC insured, are accessible 24/7 and don’t charge a monthly fee. Their terms range from 3 months to 5 years (60 months); the corresponding interest rate you can earn ranges from 1.00% APY for the 3 month CD to 2.95% APY for the 5 year CD. A one year CD yields 1.50% APY at this time.

These look like great options for your cash funds. For more information on these offerings, you can always check out the official site for Personal Savings from American Express. You can read more about these products through the site’s FAQs, as well as open an account in no time.

Personal Savings from American Express Review

The FDIC is looking at principal writedowns in its loss-share agreements with failed banks as a way to help at-risk homeowners avoid foreclosure, according to FDIC Chair Sheila Blair.

Another high yield savings account and a suite of certificates of deposit to consider for your stash of cash.

Guess who just launched a couple of online savings products with competitive rates, along with the strong endorsement to try out Upromise? The largest private originator and service agent for federally guaranteed student loans, that’s who! That would be Sallie Mae, otherwise known as SLM Corporation. While this outfit is best known for granting and managing more than $180 billion in debt, they’ve branched into the savings (and even credit business), having purchased Upromise.com in 2006 and now, by elbowing their way into the savings realm.

Well, that’s great! We certainly need more options here when it comes to our short term savings. Recently, I’ve seen some interesting products such as the PerkStreet Financial Checking Account, which offers rewards or perks instead of a yield (see our review of PerkStreet Financial), as well as SmartyPig, which is a savings account that allows you, along with other people, to make savings contributions to the same account. It’s an account that allows you to collaborate with others to fund a savings goal. I actually consider the Sallie Mae (SLM) offerings just as interesting. So let’s take a look at some details on the SLM savings products.

Sallie Mae High Yield CD & Online Savings Products

Sallie Mae offers two types of accounts for your savings.

#1 Sallie Mae Online High Yield Savings Account

This high interest savings account sports an APY that’s 5 times the national average. Currently, this account is returning a 1.35% APY. In addition, this savings account has the following desirable features:

• It requires no minimum balance, making it easy for anyone to open an account.
• It’s got no monthly fees.
• Interest is compounded daily.
• It’s FDIC insured.
• You’ll earn an interest of 1.35% APY.
• You have the potential to earn a cash bonus based on some additional requirements.

The Upromise Connection

So what’s the cash bonus all about? While all this sounds pretty standard for a savings account, with the advertised interest rate falling in the middle of the pack when compared to other online savings accounts, there’s one thing that makes this product stand out. And no, it’s not just that this product is being offered by Sallie Mae, a familiar entity that you can feel you can trust with your loans AND savings; the fact is, Sallie Mae is also the institution behind Upromise, which they acquired a few years ago.

I am actually a member of Upromise and one who can really vouch for the program, whose goal it is, is to help you save for college. Through Upromise, you can get anyone to help you save for college through everyday spending. You can shop online, dine at participating restaurants and purchase groceries, and by using a registered credit card or Upromise credit card, you’ll earn rewards — actually, cash back that will help fund your Upromise account. You can then link your Upromise account to 529 college savings plan accounts in order to further your investment. And much like SmartyPig, you can invite your family and friends to participate in the savings process with you.

That said, the extra feature that the Sallie Mae Online High Yield Savings Account provides is the ability for you to receive a 10% annual match on your Upromise earnings, and it works this way:

• Open a Upromise Account and a Sallie Mae High Yield Savings Account.
• Link these two savings accounts together in order to be eligible for the 10% annual match.
• Set up an automatic savings program with a contribution of at least $25 per month OR deposit a minimum of $5,000 into the SLM account (within 90 days of opening the account).
• Start earning through Upromise by spending on everyday things.

After these requirements are met, then at the end of the calendar year, your Upromise earnings will be assessed. Upromise will then match 10% of these earnings and will deposit this bonus into your SLM savings account in February of the next year (given that your accounts remain in good standing).

Note that these terms may change at any time.

#2 Sallie Mae Certificates of Deposit

In addition to the savings account, Sallie Mae is also offering certificates of deposit with the following terms:

• A one year CD returning 1.50% APY
• A three year CD returning 2.20% APY
• A five year CD returning 3.00% APY

These online CDs won’t require any minimum deposits, have no hidden fees and no monthly fees, and can be automatically renewed. And as usual, they’re FDIC insured.

You can also review our article on the best CD rates if you’d like to see additional options for bank CDs.

High Yield CD & Online Savings Products From Sallie Mae

You may have read on the interwebs that E*Trade is shutting down bank operations to focus more on the brokerage. As part of that process, all accounts are being sold to Discover Bank in what seems like the first bank sale that didn’t involve the FDIC.

Unfortunately for E*Trade and the hilarious E*Trade baby, taking away the bank account takes away their last differentiator. The savings account, despite it’s abysmal rates, acted as a higher than average interest rate sweep account for brokerage funds. It was an FDIC insured place you could keep your money between investments. The interest rate wasn’t that great, probably foreshadowing this sale, but it was better than getting nothing.

So today I started the process of closing my E*Trade Complete Savings account. Fortunately, it was pretty easy and you can do it online:

• Log in and look for Contact Us at the very bottom (or try clicking this link, not sure if it’ll work if you’re not logged in).



• From the account drop down, select your bank account.
• From the Subject drop down, select Account Services.
• From the Topic drop down, select Close Account.
• Type in a message, this is the message I sent:
  

  I would like to close my Complete Savings account and have its assets transfered into my brokerage account.

About 24 hours later I received the following response (there was more text around the message but I trimmed all but the salient part):

Thank you for your message requesting to close your Complete Savings Account and moving it to your brokerage account XXXX-XXXX. I have submitted the request to have the account closed and the funds moved. The transfer of the money should occur tomorrow.

Then, after another 24 hours, I received a simple Account Closure Request Status message indicating the closure was complete. Easy as pie!

Closing E*Trade Bank Savings Account from personal finance blog Bargaineering.com.

With the economy recovering, banks are starting to roll out their new account promotions where you can earn a little bit of money to change banks. The offers are usually in the $100 – $200 range, and usually require a direct deposit and some bill payments before the bonus is paid. Banks recognize there’s tremendous competition in the marketplace, especially since they can’t compete just by offering a free checking account option.

This particular offer from SunTrust is special in that it has absolutely no direct deposit requirement whatsoever, it seems to be purely about bill payment. New customers can earn $150 over the next four months by making three bill payments a month while existing customers can earn $100 over the next three months by making three bill payments a month. Usually these offers require you to be a new customer and direct deposit your paycheck.

SunTrust Free Checking

SunTrust Free Checking has no minimum balance requirement, no monthly maintenance fee, and offers a first item NSF fee discount. They are one of the ten largest banks in the US, FDIC insured, and offers a free 1st order of small package of personal checks.

SunTrust’s other deposit products aren’t great. For example, their 25 month CD offers 1.50% APY which is lower than some of the 12 month CD rates on our best CD rates list.

If you close the account within six months, there’s a $25 closing fee. Besides that fee, I can’t seem to find a catch anywhere in their free checking account (let me know if there is one that I missed) and it seems like a pretty consumer friendly free checking account.

SunTrust $150 Promotion Requirements

New Customers

A new customer is someone who didn’t have a SunTrust personal checking account on or before January 31st, 2010. To qualify for the $150, you must:

• $50 bonus: Visit the promotion page to open a SunTrust personal checking account between now and April 30th, 2010. After your account is set up, you have to return to the promotion page to enroll in the program (seems kind of backwards but you must revisit it). Then, make 3 bill payments through SunTrust Online Banking with Bill Pay within the next two calendar months. Bonus is paid out 10 weeks after the last bill payment is processed.
• $100 bonus: Satisfy the initial $50 bonus requirements and continue to make at least three payments each month for the next three months (9 bill payments total). Bonus is paid out 10 weeks after the last bill payment is processed.

You can qualify for the $50 and not qualify for the $100, but not vice versa. Also, it appears that the requirements state “calendar months,” so if you sign up today you have until February 28th to make three bill payments to qualify for February.

Existing Customers

You can’t get the first $50 but you can get the $100 for participating in the bill pay portion of the promotion as long as you haven’t used online bill pay since December 1st, 2009. Sign up at the promotion signup page and follow the prompts to set it up.

When you open the free checking account, SunTrust will initiate a soft inquiry of your Equifax credit report, so there is no impact to your credit score. Finally, if you don’t have three billpayments a month, consider sending multiple smaller payments to existing bills or credit cards.

Finally, remember that the bonuses will be reported as 1099-INT and are taxed as ordinary income (income tax brackets).

SunTrust $150 Billpay Promotion Bonus from personal finance blog Bargaineering.com.

My lovely wife and I both opened individual ING Direct accounts before we were married. In the latest step towards consolidating our financial accounts, we’ve decided to take all of our individual accounts and work towards combining them when it made sense. We’ve left investment and retirement accounts alone but online bank accounts are perfect for combining. Our latest move was to combine those ING Direct accounts into one.

I called a CSR yesterday to discuss consolidating our accounts and learned that the process is much simpler than I imagined. You can’t consolidate two separate ING Direct login accounts but you can add a joint account holder to an existing savings or checking account. This will turn an individual savings account into a joint savings account, let’s see how easy it is.

Adding a Joint Owner

If the other person is an ING Direct customer, you will need them present to login (or have that information yourself).

• Log into your account.
• Click on the name of the account you want to add someone else to.
• Click on the Account Maintenance link above the list of transactions.
• Under Account Ownership you should one spot available for a Joint Account Holder, click on the big blue Add button to the right.
• If the person you want to add is an existing customer, it’s a cakewalk from here. Choose the primary account holder (you or the new person), and then select “Yes” for the second question. The person being added will be instructed to login. Once they login, they should be added within a few minutes.
• If the person isn’t a customer, they will basically instruct them to open an account and link that new account. You will have to confirm the person who joins is the person you want. My recommendation is that you have the second person open an account using a ING Direct referral code so they can get the $25 bonus, and then add them.

Wasn’t that simpler then you would’ve guessed? Both you and the person you’ve added will receive an email (subject “Account Ownership Update”) in a few days notifying them that they’ve been added as an account holder.

Both individual account holders keep their respective logins and the joint account appears the list of accounts they own. For all intents and purposes, the account appears the same, there are just now two ways to access it (the primary account holder and the joint). If there are any differences, I haven’t been able to tell.

What about FDIC insurance? Making a joint account doesn’t give you more FDIC insurance. According to the FDIC:

…each co-owner’s shares of every joint account that he or she owns at the same insured bank are added together with his or her other joint account shares at the same bank, and the total is insured up to the SMDIA, currently $250,000.

So while you don’t get more FDIC insurance, you do get to cross off a few accounts on your list and make for a simpler system!

How to Combine ING Direct Accounts from personal finance blog Bargaineering.com.

The Move Your Money campaign peaked a few weeks ago but in our household we still haven’t yet made the change from a large bank to a local community bank or credit union. Part of the reason is inertia, the center spoke in our financial network map if our Bank of America account, but we’re working on it!

As I was doing some research for some unrelated projects, I discovered a useful resource at the FDIC. I’m always a fan of mostly useless trivia (this certainly falls in that category) so I was delighted to find a list of the largest banks in the United States. The FDIC captures all of this data for FDIC insured institutions, which is great, but it’s only updated annually, so this data is from June 30, 2009.

I bet you can name most of the banks on this list but I’d be surprised if you could name them all.

Ten Largest Banks in the U.S.

So which are the ten largest banks by deposits?

1. Bank of America: $907.3b in deposits, TARP participant.
2. Wells Fargo: $759.7b in deposits, TARP participant.
3. JPMorgan Chase: $639.7b in deposits, TARP participant.
4. Citibank: $320.8b in deposits, TARP participant.
5. PNC Bank: $188.1b in deposits, TARP participant.
6. US Bancorp: $151.9b in deposits, TARP participant.
7. Sun Trust: $118.5b in deposits, TARP participant.
8. Capital One Financial: $114.3b in deposits, TARP participant.
9. Toronto-Dominion (TD) Bank: $104.8b in deposits, as a Canadian bank it was not eligible for TARP funds.
10. BB&T: $95.0b in deposits, 2.12% market share, TARP participant.

With respect to the TARP, participation in the program isn’t an indication of bank health as many banks were forced to participate even if they didn’t want to.

This deposits information is available in the FDIC’s Share of Deposits report, which ” contains deposit data for branches and offices of all FDIC-insured institutions. The Federal Deposit Insurance Corporation (FDIC) collects deposit balances for commercial and savings banks as of June 30 of each year, and the Office of Thrift Supervision (OTS) collects the same data for savings institutions.” Here the results for the top 50 bank holding companies by total domestic deposits as of June 2009.

TARP information was taken from Wikipedia.

How many did you get right? I only got the first four banks (and not in the correct order… though I did know BoA was #1).

Ten Largest Banks in the U.S. from personal finance blog Bargaineering.com.

Arianna Huffington made waves recently when she went on national television calling on  consumers to dump their big banks and deposit all their money into local, community banks.  Huffington's site, HuffingtonPost.com, threw its weight behind a Web site designed to make breaking up with your bank a little easier — MoveYourMoney.info. It includes a ZIP-code based locator to help consumers pick through the thousands of banks in the U.S. It even sports a short, cleverly edited video that juxtaposes the classic film “It's a Wonderful Life” with images from testy congressional hearings about the banking industry.

Driven largely by Huffington's media popularity, the site quickly gained traction. Huffington's appearances on MSNBC's Countdown and CNN's Larry King Live, among many others, had some observers calling MoveYourMoney a movement. One of Huffington's partners in the venture, Dennis Santiago of Institutional Risk Analytics, says visitors have searched for banks in more than 16,000 ZIP codes — better than half the ZIP codes in the country. 

It's far too early to tell if Huffington has done something that might genuinely take a bite out big banks — real data probably won't be available for months.   But Huffington is tapping into frustration that has been building since 2008 banking collapse and bailout, say advocates for credit unions and smaller, community banks.

"It has been developing for the last several months," said Bill Hampel, chief economist of the Credit Union National Association. "Annual growth in credit union members had been very weak for the past several years…but during the first 11 months of 2009, our growth rate doubled." Credit unions added 2 million new consumers  during that stretch, Hampel said.

Karen Tyson, spokeswoman for the Independent Community Bankers Association, said her 5,000 member banks were experiencing similar, frustration-driven growth.

"Community banks have, since the onset of the financial crisis, gained new customers," she said.   

The American banking system appears to provide seemingly endless alternatives.There are 8,000 banks and 7,600 federally insured credit unions, according to the American Bankers Association.

"The good news is people have choice," said Nessa Feddis, spokeswoman for the American Bankers Association.  "There's lots of competition, and if people are dissatisfied they should look around and vote with their feet."

But most don't.  A tiny group of large banks dominate.  In 2009, four banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo — held 39 percent of all deposits in FDIC-insured banks, according to Reuters. 

The high concentration of account-holders — combined with a low concentration of good will – certainly seems create the potential for a mass exodus. So why the need for a Huffington Post-prompted movement?

It turns out the breaking up with your bank is hard to do. 

In 2008, the Federal Reserve published a study around what economists call "switching costs" — the pain and suffering consumers must face when trying to leave one bank to join another.  The results were disturbing.  The study, by Fed senior economist Timothy Hannan, found it was incredibly difficult for consumers to get reliable information about the true costs of the new bank, for example, and described what a "bargains-then-rip-off" strategy to reel in customers and then exploit them. 

The euphemistic  name for the strategy is a “two-period” model. )  Period one is a free toaster.  Period two is cascading overdraft fees.

Even worse, the true costs and fees levied on account holders may not even be available to consumers until they've committed to the new bank. In many cases, fee schedules aren’t listed on generic Web sites and  can only be viewed by account holders after they’ve logged in – so there is literally no way to comparison shop.

“There may be some lack of transparency with regard to pricing,"acknowledged American Bankers Association chief economist Keith Leggett.

The switching costs become apparent when trying to extract your old bank's tentacles from your new financial life.  Today, most consumers use their checking account for a dozen different activities — direct deposit of payroll checks, automated online bill payment of mortgages and auto loans, recurring debit card transactions, automatic savings plan deductions, credit card bill payment and so on.  Ending all these transactions, and starting the payments anew, is such a hassle that "inertia" often takes over, says Hampel.

"Changing where you have your checking account can be a royal pain in the neck," he said. "It's like if you lose a credit card and have to inform all those people you have a new one, only much worse than that."

To combat the switching cost problem, many credit unions have developed "switch kits" to grease the skids, including forms that help new consumers track the changes needed for all payments and deposits. Those may ease the pain a little, but ultimately getting a new bank means fighting through a lot of red tape.

Still, consumers should look past the hassle and find a bank or lending institution that suits their needs, says Leggett.

"Who you do banking with is very important.  It may be the most important financial relationship of your life, so you should do your homework," he said. 

Leggett welcomed the discussion about switching to smaller banks and credit unions started by the Huffington Post, but he cautioned consumers against a "knee-jerk" reaction to it.

"In not every case is a credit union better than a bank with regard to pricing or fee structure," he said, saying that credit unions have also been guilty of charging annoying fees, just like big banks. "People have to realize when looking for a financial provider that they should always shop around and find a provider who offers the appropriate level of convenience.

Smaller banks and credit unions, he warned, will not provide the same "product mix" as larger banks, and are less likely to offer benefits for using multiple products – such as free checks or discounted loans.

But credit unions provide obvious benefits – in the form of better interest rates, both on loans and deposits, said Hampel.  According to Datatrac Corp., average credit union credit card rates are currently more than one full interest point lower, car loans are 1.5 percent lower, and one–year CD rates are 0.30 percent higher.  (Banks currently enjoy a small edge over credit unions in mortgage rates.)

Meanwhile, community banks offer something big banks find nearly impossible to compete with — local ownership and the ability to talk with a familiar face in the event of unexpected financial hardship, said Tyson of the community bankers group.

“They always put customer service first, and doing right by the community first.  They will not give you a

loan purely to make a profit. And you’re not going to be just a number,” she said. “You’ll be able to walk in the door and you can find the bank president, and know that he lives in your community. … It's a different sort of a custoimer relationship.”

Like Huffington, Tyson sees the switching issue in a larger context.  Federal law provides for a nationwide "concentration cap" of 10 percent, meaning no one bank can control more than 10 percent of the U.S. deposit market. 

Because of the banking collapse and resulting consolidation – leaving four banks with nearly 40 percent of deposits —  the cap is currently being threatened, leaving the U.S. financial system concentrated in too few hands, Tyson said. Through its "Fix Too Big to Fail" marketing campaign, the community bankers group  is lobbying Congress to lower the cap and force large banks to divest some of their holdings.

"The only way to change the dynamic is to have legislation in place that makes it not as appealing to be … large institutions," she said.

RED TAPE WRESTLING TIPS
Marketing campaign and blog-initiated movement aside, it’s always a good idea to review your financial relationships and see if you can get a better deal.  Consumers interested in investigating a move away from big banks should know it takes a bit of work, but there’s plenty of help available online, and one or two lunch hours should do the trick. Here are some tips:

* Rates aren't everything, and people matter. Leggett points out that many consumers are far too concerned with the published interest rate they'll earn on savings and checking accounts, and sometimes pick banks based on small differences.  Given that current rates are so low, earned interest should be of little concern at the moment; fee schedules are more significant. But even more important is the likelihood that the bank will treat you like a human being should anything go wrong; if, for example, you accidentally overdraw your account and land a series of overdraft fees.  Will a familiar teller help you, or will you end up stuck on a long voice mail tree?  We all make mistakes. It’s hard to put a price tag on the reassurance that you’ll be treated like a person, and not a criminal, when your turn comes.

* Don't forget the middle child. Feddis points out that there is middle ground between the four huge banks and thousands of small banks — what she calls "medium-sized" institutions.  They might offer the best of both worlds.

* Beat the feared late fee:  The real fear over switching comes from the potential for a missed loan or credit card payment, or double payments that could lead to an overdraft. There are several ways to ease the transition between institutions, although all of them involve a little extra money.

The easiest thing to do is double up. Keep both accounts open and keep all your payments turned on until you can confirm that new payments have been received by the old payee.  This will require having a lot of extra money to spare. A variation involves paying with your new account a full 10 days earlier, giving you time to cancel scheduled payments from your old account. You'll still need the extra money in case a payment lands in limbo. In either case, it's good to set up overdraft protection on both accounts by linking the checking account to a credit card, savings account or line of credit, so there's backup if you screw up.

The simplest – but most time-consuming — method is to open the new account without closing the old one, and then switching one bill payment one month at a time to the new account, making sure each one is set up properly before switching the next one.

*If your credit card issuer has cut you off: Many consumers find they are losing available credit on their cards or losing their cards altogether.  This hurts their credit score.  Hampel said consumers thus spurned should still apply to a credit union for a new card and will likely get the account as long as their credit isn't severely damaged. Expect a lower credit limit than you're used to, however — credit unions are much more stingy about credit card maximums.  That's a good thing, Leggett says:  that's partly why the bank credit credit card default rate  is currently around 10 percent, while credit union rates are down near 2.5 percent.

*Finding an alternative. While credit unions have certain limitations on membership, Leggett says that virtually all U.S. adults are eligible to join at least a few credit unions.  If you're stumped, try the credit union locator at

http://icba.org/consumer/BankLocator.cfm?sn.ItemNumber=51757

To find a small bank, try the bank locator

http://icba.org/consumer/BankLocator.cfm?sn.ItemNumber=51757

or use the Huffington Post tool, which lists only banks graded B or higher on Institutional Risk Analytics’  scale.

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