Updated: May 3, 2013 12:14PM
Originally published: August 14, 2003
Size matters when it comes to choosing a bank. It’s not that larger banks are safer. They’re not. All deposit accounts are insured up to $100,000, no matter whether you bank at a huge institution or a smaller, local bank. But banks with larger market share tend to have more ATMs. And if it really annoys you--as it does me--to pay an extra $1.50 or $2.25 in fees to use another bank’s ATM, you probably stick with one of the larger banks in town.
The banks know this. Famously, several years ago the city’s largest bank campaigned to get its depositors to use ATMs instead of more costly teller services. We didn’t want to pay the fee to see a teller, so we switched to ATMs. Now many of us are hooked. (The fee has since been revoked, but the legend lives on.)
Smart money management
I find that using an ATM has some advantages in money management. It’s much easier to track my cash by using ATM withdrawals, because they automatically download by location into my online banking program, giving me a record of my cash withdrawals.
So I use an ATM whenever possible, and never begrudge paying the extra fee for easy access to my cash when I’m traveling. When I was in Europe earlier this summer, it was a delight to withdraw Euros with the same ease as getting $10s and $20s in America. But around town, I’ll always walk the extra block to find my own bank’s ATM and avoid paying the fee.
I’ve just realized that my ATM addiction has me hooked to a bank that provides less and less service, but more ATMs.
Coincidentally, US Banker magazine recently ran an article headlined “Turf Wars--Windy City’s Bank Scene Heats Up.” The article goes on to point out that “the joke in Chicago’s banking community is that there are not enough street corners to accommodate all the bank branches that out-of-towners want to open up in their city.”
For years, Illinois’ antiquated banking laws prohibited branch banking, out of concern that big Chicago banks would swallow up smaller downstate banks. As a result, many years later Chicago is still the most fragmented major market for banking. So now, relatively new names here like Fifth Third and National City are aggressively moving to grab market share.
Well, if those banks really want to compete in the Windy City, I have a few suggestions.
I’m a big proponent of online bill pay and banking, but I still like to walk into a bank, and I guess others do, too. So here’s some free advice to those competitive banks. (And if you’d like to add your advice, send me an e-mail, and I’ll do a followup.)
* If you’re going to build branches, don’t make them intimidating. We know you keep our money locked up. But don’t allow tellers to gab behind closed windows while we stand in long lines hoping someone will notice that we’re there to do business.
* Service counts. I know you have to spend a lot of money on advertising to announce your presence. And yes, competitive interest rates do attract deposits. But the big banks seem to think they can get away with service cutbacks--by eliminating everything from the private banking services to the convenience of viewing and paying e-bills online. They know we won’t move because they’re everywhere. But there’s more to banking than real estate.
Which brings me to what I think is a much better idea--one that might save you some money, as well as attracting a lot of new depositors.
**Instead of spending a fortune setting up ATMs, and servicing them with cash every day, why don’t you just waive or subsidize the fee for using other banks’ ATMs? That would free up the entire city’s ATM network. No longer would we have to walk a block to save a buck. All of us regular ATM users would open checking and deposit accounts at your bank, since we would no longer be tethered to whichever bank had the largest ATM system. And your costs would be offset by your growing deposits and market share.
I’ll be waiting for that announcement. But it could never come without competition. That’s the advantage of free markets that attract new players. Competition should bring down the costs for all of us. And that’s The Savage Truth.
Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange and McDonald’s Corp. She appears weekly on WMAQ-Channel 5’s 4:30 p.m. newscast, and can be reached at her Web site, www.terrysavage.com.