*Me to group*
“Hello everyone. My name is Matt and I’m a recovering big bank customer.”
*Group replies in unison*
*Me to group*
“I’m 33 years old, and have been borrowing from big banks ever since they courted me with offers of credit cards and free t-shirts on my University campus back in the 1990s. Ever since the glorious free t-shirt days, I’ve been indebted to these banks at varying levels off and on.”
*Group offers up sounds of compassion*
“Although I’m no longer actively entering into these bad relationships, my ties to the banks remain, and will for quite awhile as I climb out of servitude and work to free myself from bondage. Thank you for listening.”
Good reasons to be angry with big banks
Since deciding to put an end to the cycle of abuse, I’ve been studying the business practices of big banks. During that time, I’ve discovered that they’re not the sort of businesses that I want to associate with on a daily basis. I suppose I entered into all of my relations with them (e.g., mortgage, credit cards, auto loans, etc.) because I was just sheepishly following along with what everyone else was doing. Going forward, I’m just happy to say that I’ll no longer be so ignorant and complacent.
Here are just a few of the recent ways big banks have disappointed and utterly surprised me:
- Bailed out financial institutions post huge Q2 profits. While the American consumer is struggling to pay down debt and build an emergency fund, big banks who just received billions of dollars from US taxpayers are posting $3 billion quarterly profits! Sad but true.
- Banks profit while US home repossessions rise. No, you didn’t read that wrong… While we’re losing our homes and essentially funding the bail out of these bloated and corrupt financial institutions, again… they profit. Our loss is their gain.
- Banks profit but are no longer lending money. One of the main purposes of the bailout was to stimulate the economy. Instead of turning around and lending the taxpayers their money back, however, the banks are sitting on the loot. Banks profit while loans drop.
- Despite record profits, big banks are raising fees. As if they were not already nickel and diming us to death, and despite massive earnings and many of their customers facing financial troubles, big banks are raising fees almost across the board.
As you can clearly see, banks are profiting enormously while the American consumers that have funded their entire existence scrimp, save, and suffer.
The NY Times recently worded it this way:
“The headlines over the last week have reinforced the perception that the country’s financial institutions, or at least some of them, are beginning to rebuild and profit. But resentment and the risk of public backlash against these banks remain, as shown by the recent opinions and editorials complaining about how ungrateful these banks are and suggesting they are once again trying to take advantage of the government and game the system.
As Goldman Sachs earns $3.4 billion in a single quarter, many Americans continue to suffer from the recession, which was triggered by a financial crisis in which the banks played a part. News reports about banks taking a more assertive approach reinforce this perception. So IÃve decided to look at whether the criticism rings true: Are banks getting too cheeky?”
For their part, CNN/Money said “Big banks have some nerve!” and that:
“…you have some big banks putting out press releases that essentially are saying, ‘Hey. Look at us! We’re still lending! Honestly!’ But the data from the Fed paints another picture entirely. I am not suggesting that banks go back to the days of approving anything with a pulse for a no-money-down option ARM that’s destined for default. But until banks start to lend more freely to responsible individuals and businesses that deserve credit, we will remain in this recession.”
Finally, Pro Publica, a site dedicated to delivering journalism in the public interest, shows us exactly where all of that $1.1 trillion in taxpayer money is going on their Eye On The Bailout page.
So what’s the answer?
I am working tirelessly to get out of debt, and rid myself of all relationships with any of these big banks. I currently have the following relationships that I am working to terminate for good:
- 1st Mortgage – Wells Fargo
- 2nd Mortgage – JP Morgan Chase
- Auto Loan – Capital One
- Credit Card 1 – JP Morgan Chase
- Credit Card 2 – Capital One
- Credit Card 3 – Citigroup
Looks like a heavy burden to bare, and a seemingly insurmountable task, but let me remind you dear reader… “a journey of a thousand miles begins with a single step” –Lao Tzu.
I plan to rid myself of these “toxic money relationships” one dollar at a time! And I will not stop until I am free!
Moving forward, I intend to continue and increase my banking relationship with ING Direct, where I currently have an online savings account, as well as with my local credit union.
And so I ask you…
Is the decision to do business with big banks a moral issue? For me, the answer is a most certain and resounding “YES”! Of course, this won’t be the case for everyone, but I sure would like to hear your point-of-view. Please let us know how you feel by leaving a comment below.
52 Responses to “Borrowing From Big Banks – A Moral Issue?”
If I may play devil’s advocate, too, preferably without being called a demagogue or sophist –
To all the folks so angry at the banks, let me ask you:
How many of you refused your stimulus check last year or this? How many of you refuse to use your home mortgage interest and property tax deduction to reduce your tax liability? How many of you, if you buy a first home this year, will refuse the $8,000 refundable credit? How many of you plan to decline your Social Security checks (assuming it’s still around)? How many of you would decline FDIC insurance on your deposits, if you could?
When politicians decide to throw money at people, is it really that outrageous that the people it is thrown at choose to catch it? Granted the moral high ground would be to decline it, but we have allowed our politicians to create a system that threatens to make suckers out of anyone who isn’t in line for a hand-out. Nay, more than allowed, many have demanded it. In the last four years, Americans have consistently elected the politicians who promised to give them the most “free” goodies, and in the primaries of both parties for many more years than that, we’ve consistently chosen the candidate who did that.
ObliviousInvestor is right that it would have been a breach of a bank’s fiduciary duty to its shareholders to refuse the bail-out money and allow itself to go under, and it is under no moral obligation, other than for public appearance’s sake, to alter its business strategy because it received the money. (And let’s not forget, a lot of the banks were forced to take it and/or tried to pay it back very quickly and were not allowed to.)
The banks are not to blame for taking the money or even for lobbying for it, the American voter is to blame for electing politicians who would give it. I also don’t blame the banks for lobbying for the laws and regulations that would most suit them. Everyone, including banks, should be allowed to advocate to the government for their own self-interest, especially as government becomes all-powerful. I blame the American voter for electing politicians who are so craven and lacking in principle that they can’t say “No.” With the American voter electing politicians based entirely on how closely they promise to resemble Santa Claus, it stands to reason that the whole country will be devoting most of its creative energies to gaming the system rather than taking personal responsibility.
I’ve had a perfectly decent long-term (20+ years) non-exclusive relationship with Bank of America and feel that I’ve received exactly the services I’ve required from it at a fair price (and sometimes, a price that seemed almost too good – it’s been many years since I paid a bank fee for anything). The Bank of America employees at my local branch live in my local community, shop at our local shops, eat at our local restaurants, use our local professionals and say “Hi” to me by name when we run into each other at our local grocery stores.
I also have banking/mortgage/credit/investing relationships with Capital One, U.S. Bank, Schwab, ING, Chase, and from time to time, others. I have the same loyalty to each of them that they have to me – we’ll keep doing business as long as it suits us both. They won’t get to judge my reasons for dumping them, if I do, and they should have the same right.
Would that I could say the same for my relationship with my President, Senators, and Congressman – none of whom I voted for and all of whom are committed to playing Santa Claus with my money, messing with my health care, and and otherwise interfering in my life.
@ObliviousInvestor: Thank you, I humbly retract my “without exception” statement and replace with “most”.
Matt: My comments were (somewhat) pro-bank. And while my screen name isn’t my name, it’s hardly anonymous. (If you click through to my site, my name–Mike Piper–is clearly posted in several places.)
I respect your opinion/viewpoint, and believe me, I’m cheering you on on your journey to get free of debt.
That said, I’m quite happy with my big bank (BOA). They charge no fees, have a great online interface, and I don’t feel abused in any way whatsoever. I’m a satisfied customer. If others have used BOA’s services in ways that were harmful to their own finances, that was their own choice.
Which begs the question… what shared stimulant makes people from different walks of life, in all different financial positions hold common this perspective?
@LOL: Extreme value is continually found in the concept of balance. Having a proper balance always seems to be the correct answer.
Also, one of the fundamental truths of finance, dating back to the foundations of monetary systems, is that which you mentioned.
“The rich ruleth over the poor, and the borrower is servant to the lender.” – Proverbs 22:7
Lastly, the posture held in the post is shared largely irrelevant to financial position… which can be evenly gleaned from the comments above.
I have accounts with BofA, my local credit union, Vanguard, and Ally bank.
I have accounts with each because each has a nice benefit that they offer. BofA has the best website for a general purpose checking account and online bill pay (plus it is a ‘no fee’ checking account) — plus the ATM availability is unbeatable. My credit union has the best rates for personal loans and home equity loans. Vanguard for it’s mutual funds and IRAs. Ally for its online savings and CD rates (and the innovative ‘no penalty’ CD).
Could I move 100% to my local credit union? Yes, but I would hate it.
My credit union’s website is pretty horrible: when using a checkcard at a merchant, it does not even tell you the merchants name (only the address) on the CU website — that is a show stopper for me since I use statements for tracking my spending — ATM availability is pretty much non-existent. Also, the savings account rates (and CD rates) at the credit union have fallen drastically in the past few months, not even close to Ally.
A 1-year ‘share certificate’ at my CU only pays 1.4%, and that is available if you are buying the biggest $100k certificate — if you had less than $10k to invest then the rate is 1%. Ally has a no-minimum 1-year CD paying 2% right now.
Matt: your working to get out of debt is a good thing, and I applaud your efforts. Perhaps your views are different from mine because your relationship with banks is that you are making them money (by paying interest), and my view of banks is they are making me money (by paying me interest).
The Debtor is truly a slave to the Lender.
It is interesting how without exception, all of the pro-bank comments have come from anonymous commentators.
To them I say this… go do all your banking with the big boys and be happy. I choose to get out asap because I can see through all the sophisms.
“Bailed out financial institutions post huge Q2 profits …”
Why everyone is conveniently forgetting that many of these “bailed out institutions” neither needed or wanted the money and were told by Paulson to take them (http://blog.taragana.com/n/paulson-told-9-bank-ceos-they-were-required-to-take-tarp-money-govt-documents-confirm-62704)? If you are forcing someone to take the money does it give you a right to dictate anything to this person? Sure, Citi needed the money later on, but Godman or Morgan Chase didn’t. They haven’t asked for the money.
Moreover, banks paid billions in interest and repurchased stock warrants. So what moral right do you have telling the banks that were forced to take the money what they can or cannot do? Does your mortgage company have a right to tell you if you are allowed to repair your kitchen or that you aren’t allowed to make profit until you repay the money?
As to B of A – yes, they needed the money. Do you know why? Two words – Merrill Lynch. Just a few days ago Paulson testified under oath that he told B of A CEO that he’ll have him fired if he doesn’t buy Merryll Lynch (http://online.wsj.com/article/SB124775392040451765.html). “Mr. Paulson acknowledged that he warned Mr. Lewis that Bank of America management could be ousted if they walked away from the Merrill Lynch deal.” If government was one of main reasons B of A is in trouble, why shouldn’t it have bailed out B of A?
Also as Jim said -a lot of banks paid back the money. Plus, the government is getting interest and has stock warrants. Do you know what it means — it means that if banks do well, government stands to make money. If banks don’t do well – the government may lose money. So you want to take your business elsewhere so that taxpayers don’t get interest or don’t get their money back? Now this is smart.
Incidentally, what makes me angry the most is that people think about banks as a single entities which they identify with CEOs that made bad decisions. Newsflash. The majority of banks’ employees had nothing to do with this crisis. Some investment advisors didn’t deal with credit default swaps or CDOs or lending but actually made money for their clients; some IT personnel – programmers, network administrators, system administrators, DBAs just kept doing their jobs as did cashiers or other personnel. When bank isn’t getting profits it’s these people who suffer the most. Then there are bondholders – this includes anybody who has money in retirement funds or bond index funds. Index funds include these big banks too.
I’m a credit union advocate on every level! Once I get BOA’s credit card off my back, I’m D O N E, done, with big banks.
AND…my credit union enriches my community. It’s socially and economically “green.”
Check out this chap in New Zealand who got fed up with his bank: http://www.stuff.co.nz/nelson-mail/news/national-news/2667215/190-000-withdrawn-in-20-bills .
@Involved: It’s not about blame – it’s all about intelligent & helpful discussion. I REALLY like the point you raise about the Feds, which is definitely worth debating.
Sadly, due to mutual behaviors & events that have transpired as of late, it appears rather obvious that the feds are in cahoots with big business… thus the enormous scam that has been pulled off over the last year (the Socialistic gov’t takeover of private business).
If my bank raises my credit card rate and I don’t like it, I terminate that relationship and stop paying them. It’s not that hard to do.
I wish I could say the same for my relationship with the federal agencies that took money from all of us and gave it to the banks and called it a bailout. I am not sure why the banks are getting blamed more heavily than the feds.
Craig (39)–Paul Volcker must have had the same teacher in 6th grade because he said the same thing at at televised conference of the biggest names in finance last year. He actually said it in a negative way, noting that banks have been disproportionately profitable compared to other businesses in the past 20 years or so.
What ever “deals” we may get out of big banks, it’s clear that they’re getting a better one out of us.
All: Interesting perspectives. We have several accounts with a major national bank. While I’d prefer to use our local “small town” bank for a variety of reasons (higher rates, lower fees, more personal service, etc.), convenience trumps those issues. We travel quite a bit and like having “our” bank available just about anywhere we go.
We used to bank at a credit union, but there’s not a decent one around here, so that’s out.
As for credit cards, we use whichever ones pay the best rewards. We don’t carry a balance, so we’re only interested in convenience (all are pretty much the same) and rewards (there are big differences here).
Back to the original question… I’m not sure that this is a moral issue per se. To me, it’s not a general good vs. bad sort of thing. I think the “right” answer will vary from person to person (which Matt alluded to at the end of his article).
When I was in grade six my teacher told me, “Anytime you got into a new city look and see which buildings are the tallest.” Guess which building they are – banks. I decided that they might be doing something to profit of our money so I decided to be cautious of banks – especially those that charge a lot of fees. Because of that I do typically bank with smaller institutions like credit unions. I do, however, bank with some larger banks like ING as long as they are fair to the customer.
I frequent your site a lot but this post was a bit off the mark. Sure the big banks have been hosing all of us for what seems like decades but at what point do we acknowledge our own responsibility. It’s kind of like a 30 year old smoker saying he didn’t know they were dangerous. Sad truth is that many of the big banks were forced to accept monies from the Fed to prevent the ones that truly needed it being identified and run on. Goldman Sachs just paid back Uncle Sam with 24.7% interest for a loan of less than one year (specifically buying back warrants). Trust me, I’m no fan of the big banks, everyone should strive to pay off their credit cards monthly and live within their means and maybe the big banks would end up a little smaller.
Perhaps offtopic, perhaps not: Did anybody else see the video from one of the links above?
right around the 2:30 mark, they are interviewing the neighbor of one of the foreclosed properties. The guy says he wants ‘the bank’ shutdown because there are liquor bottles and trash all over the porch of the foreclosed (attached) home. What a joke — why doesn’t he spend 4 minutes out of his time to clean it up himself? I wouldn’t be surprised if it was him and his buddies that tossed the crap over there in the first place (pretty sure it wasn’t ‘the bank’ doing it).
In my neighborhood, we get together and clean up properties (even ones where the properties are not vacant). If you don’t respect your own place, don’t expect anybody else to respect it either.
To me, that is a bigger moral issue.
Do your local banks/credit unions offer credit cards with points, miles, and other perks (ie, 0% intro apr, etc..)
1. If bailed out companies make profits then thats good. It means the companies are doing well and the US taxpayers will get our money back. I’d rather the bailed out companies have a quick recovery than a drawn out slow recovery or bankruptcy.
2. Why are reposessions rising? Cause people aren’t paying their mortgages. How far can we blame the banks for that?
3. Should banks lend money to people who can’t pay it back? There is a lot of lending going on and lack of credit is not hurting the economy overall right now. Lack of lending was a problem for a short period and we got over. Who’s unable to borrow money that should be able to? People are saving more and borrowing less in general. This is a good trend. I really don’t think we want the banks making more shaky loans, thats the cause of the whole problem in the first place.
4. Any time a company raises fees or costs to the consumer its a good reason for the consumer to reevaluate if they want to keep doing business with the company.
A lot of the big banks have paid back a lot of the bailout money. Big banks are often not operated differently than little banks. From many accounts the government more or less pushed even healthy banks into taking bailout money.
I quit my credit union years ago since they had stupid automatic fees on my savings account. Their policy and fees drove me away.
Unless a bank is outright treating you as a consumer or other consumers poorly then I don’t see a moral reason to quit them. I don’t think making profits and increased fees are “corrupt”, but simple capitalism.
The best reason to pay off your credit cards and mortgages is to get out of debt.
We ended our relationship with Bank of America when their customer service proved that they did not value us as depositors. We moved the BofA accounts to ING Direct and it has been a big improvement.
We, the consumers have collectively blown up the economy. However, we are the ones suffering now.
I am a little disappointed with my local credit union. My local Citibank offered me a better cd ( a still paltry 2.5% for 2 years with a 1 month early withdrawal penalty but better than the 1.4% from the CU with a 6 month penalty).
My credit union does not offer a type of account that allows free check books or cashier’s checks or the like.
Many of the local auto dealers are offering better loan rates than the local CU though this might be an unfair comparison since they have probably factored in the cost elsewhere. Since my local CU was offering a better CD rate before I am still maintaining an account with them hoping that this will be true in the future and I can move some money back.
I don’t believe I have had to pay high fees while banking with the big banks. I try to have a better than bare bones checking account and try to ensure that this comes with the advantage of reducing or eliminating most of the fees. There might be fees that I am not aware of that I am being charged and I would appreciate it if someone could educate me. I make it a point to only use my bank’s ATM.
I agree that some of the banks have raised credit card interest rates. That would tick me off too if I carried a balance.
While I applaud the intent of the post the fact is (like other commenters have mentioned), you have to shop for the best rates, be prepared to walk away from financial products laden with expenses.
By the way this is not a pro-big-bank post. I honestly don’t care about any of the institutions. I only care about my money and how well its doing.
Wow! Getting a little dicey here. I love the conjecture and the creative dialogue in the post, but Matt we have to admit that this economic crisis we are in is a result of a lot of poor decisions from a lot of different people including government, big banks, loan officers, and yes even us – (the general consumer – buying things we can’t afford with money we don’t have).
Basically what I hear you advocating is taking responsibility for our own actions. I agree with you. I don’t agree with where this country is headed or how big companies have been bailed out, but the bottom line is we need to do what is right no matter.
Proverbs is so accurate when it says the “borrower is slave to the lender”. When we aren’t enslaved to a company we can choose to walk away and do what’s best for us.
@LOL: In an attempt to halt a personal conversation on a blog comment string, please email me at Matt[at]DebtFreeAdventure.com to discuss further.
Matt: yeah, I read that the other day (Economics in One Lesson). I’m pretty sure I understand the concepts behind ‘the lesson’. Am I trumpeting one of the economic fallacies from that paper? If so, please tell me what part I am messing up. TIA.
@LOL: I would encourage you to read “Economics in One Lesson“. Here is a free, online version (gotta stay frugal). 🙂
In particular, reading the first chapter titled, “The Lesson” is of much benefit. The rest of the book is simply a study in the application of the lesson.
Matt: I didn’t mean my comments to be a character assassination attempt on you — and if it appears that way, then I apologize. It was meant as constructive criticism where I was playing the ‘devils advocate’:
In common parlance, a devil’s advocate is someone who takes a position he or she disagrees with for the sake of argument. This process can be used to test the quality of the original argument and identify weaknesses in its structure.
Constructive criticism is healthy & much desired! Criticism that sets out immediately & predominately to assassinate character or opposing argument is always destructive… no matter who it comes from.
That is my comment lesson for the day… it had to be said. 🙂
If you’re a recovering alcoholic, you don’t go and hang out at the old bar you used to frequent. So if you’re on a debt payoff plan from excessive credit, why would you go back to the same banks that made it so easy for you to get into debt in the first place?
In regard to protecting shareholder interests as moral cover for recent excesses, it’s hard to imagine disregarding sound credit standards, crashing stock prices and feeding at the public trough as being in anyone’s interests, let alone the shareholders.
Why on earth did Citibank raise my Credit Card interest rate from 8% to 14%, while Interest Rates are at all time lows, and I’ve never missed a payment ticks me off.
We should support our local banks.
More than just the actual dollar amounts they make from fees, the percentage of banks income that comes from fees – as opposed to the profit inherent in the business of banking – is a sign that they’re not doing very well as bankers. It’s like a car company selling off a non-car subsidiary and using the profit from that to pretend that they’re doing well selling cars. Their shareholders should worry.
I’m actually free and clear of banks except my credit card, which is Bank of America – but I don’t carry a balance on it. We just refinanced our mortgage through a credit union, and I use a credit union as my primary bank as well.
Sometimes I get frustrated with the credit union – it has few locations and short hours, compared to the banks -but then I go account-shopping and see the astounding fees the banks charge. I don’t know why so many people use them.
@LOL: that last comment is filled with sophism’s reminiscent of demagogues the world over.
Though I love a rant as much as the next guy — let me play devils advocate here for a minute:
Would you prefer that bailed-out banks not be posting profits now? Banks posting profits is proof that the bailouts worked, right? I’d be a lot more worried if banks were still not profitable.
Home repossessions rising — is that really a bad thing? Capitalism is all about giving the resources to the entities that can utilize them more efficiently. The other side of repossessions is that somebody else who is actually financially responsible is going to get the house now — which is a good thing, right? Who do you think is more deserving of the house?
Banks profiting, yet not lending? Really? I thought banks only make money when they lend. Perhaps the banks have wised up and are only lending to people that can actually pay the loans back — hence not ‘losing’ money. That is a good thing, right? Or do you want the banks to continue lending to people who can’t pay back the loans (which was the cause of this crisis)?
Banks are raising fees, and so are telephone companies, and airlines, and cable companies, and every other business under the sun. If you think the fees are too high, the you should have no problem opening a competing business and taking their market share, right?
Well said Matt! I like the “Debt Anonymous” format.
It’s for reasons such as these I prefer doing business with local credit unions/pure play online banks, instead of doing business with institutions that could have (should have?) gone extinct.
Investing in them, well, that’s another story. 😉
Don’t forget that Goldman Sachs just paid back their bailout plus about 25% interest!!! So “we” are profiting too in a way.
Matt: I’d be perfectly happy to let any failing business to go out of business.
I’d argue, again, however, that to blame a bank for asking for bailout money seems odd. In fact, I’d again argue that they have a responsibility to ask for it, given the opportunity.
I am ABSOLUTELY WITH YOU Matt!! I was especially abhorred when Citibank, which is 35% owned by the gov’t and got a bagillion in bailout money decided to raise their base salaries by 50%!
I withdrew ALL money cash from Citibank. It made me sick.
Fight the tyranny!
@ObliviousInvestor: I agree that people get themselves into their own messes, and that they need to focus on shoring up their bad habits & bail themselves out. That is why I wrote the article Is Personal Responsibility Dead?.
I see your point about banks being a public company & being responsible to their shareholders… and it is a very solid point. I will answer it this way…
Their actions have become atrocious, and if these are the actions they must take to make money for their shareholders… then count me out, I want no part of that deception, greed, or lust.
If my business – that you funded – went bankrupt, then I forced you to give me money to bail me out of my own business mistakes. Then proceeded to practice business that was indeed detrimental to your needs as my customer… in order to make money… would you still want to be my customer?
Individual people are NOT the only ones who need to suck it up & be responsible for their own actions. Big banks, big auto, & every other business need to be responsible for their own actions too. If their business practices ran them bankrupt & out of business… then hallelujah, let them GO OUT OF BUSINESS!
1) Should institutions attempt to make a profit? By all means. Is their obligation in the attempt? Is it immoral to not make a profit? Are not their customers (especially in baking institutions) investors as well? If yes, then does it become another matter in which more money speaks louder?
I’m not sure the exact number of people who would make up what would constitute the shareholder oligarchy of the main financial institutions involved (in terms of monetarily tied) in the events that led to what we are now experiencing, but I am willing to bet they are far fewer in number than the amount of people who are feeling this recession in its fullest force.
2) I whole heartedly agree, but the financial institutions are making money, the condition of the economy notwithstanding, while the people they used to gain their wealth (or: those who were allowed to misuse) are staring down into the abyss of insolvency. There seems to be very little recourse for the end-user.
When you take an investor’s money there’s a very clear expectation that you attempt to earn a return on their investment, that seems to me to generate a moral obligation to attempt to do so.
Does it override all negative effects of their actions? No, of course not. But we need to at least take it into account.
As to your second question, I don’t mean that people abuse banks in the manner in which one might abuse a person. I mean that people abuse bank services in the sense that one might abuse alcohol.
That is, people take services (credit cards, mortgages, personal loans) that are quite reasonable when used properly, and they use them poorly, to the detriment of their finances. Much like alcohol–which can be used appropriately–can also be used inappropriately, to the detriment of one’s health.
Finally, someone has taken up this topic.
Many times, I have pointed out the incongruity of all the screw-ups big banks have made on various PF sites to people who just aren’t willing to give up their precious rewards cards even while they’re benefiting companies that have raked consumers over in many ways. there seems to be a disconnect in seeing the connection between the big picture and one’s own personal financial household. I find this sad and pathetic.
there have always been options to doing business with big banks; not only thrift unions, but also smaller regional and community banks, which in fact tend to be more conservative in their lending practices and offer more competitive rates on savings accounts and lower rates on lending.
1) Why is a bank’s obligation to its shareholders a “moral” issue instead of merely one of consequence given the structure inherent with the shareholder/institution model? Furthermore, is their obligation to make a profit for their shareholders something which supersedes any negative effects of their actions?
2) People who went signed onto loans they had no way of paying back excluded, how else have we (those who use/are used by major banking institutions) misused banks?
Great Post Matt! I’m with you 100%, and will be finishing off my last big bank affiliation next month!!!! 🙂
USAA rocks if you can get in! and ING is good as well.
Best of luck to you brother, and don’t let the naysayers get you down… 🙂
Gord, mistakes are often the best teachers, no?
It seems unfair to criticize a person who shares his mistakes in the hopes of helping others to avoid them.
With these poor debt decisions you might consider blogging on a topic other than finance …
1st Mortgage – Wells Fargo
2nd Mortgage – JP Morgan Chase
Auto Loan – Capital One
Credit Card 1 – JP Morgan Chase
Credit Card 2 – Capital One
Credit Card 3 – Citigroup
I’d like to voice a respectful disagreement:
I feel like if we’re going to talk about moral issues, we need to at least mention that banks have a moral obligation to serve the interests of their shareholders. That is, to make a profit.
In the conclusion to your analogy above, you refer to it as a “cycle of abuse.” The comparison being to alcohol or other substance abuse, I gather. (I quite enjoyed the analogy, btw.)
It seems worth noting, however, that in those cases, it’s not the alcohol/drugs that abuse us. It’s we that abuse (that is, misuse) them. I, for one, would argue that it’s the same way with banks.
@LOL & Lara: I agree with the credit union approach, that’s why I said this in the article:
Whether you’re talking food or money… going local is the way to go!
It really is time to sever these relationships, not just with big banks, but with big everything.
People have been lured into credit arrangements with easy up front terms (zero down, zero interest, no payments til 20–, etc), but now that the economy has turned, the door was slammed shut rather quickly and most definately mercilessly. Then they lay people off (some of us) and get public money (some of it from us)to stay open when they were technically insolvent.
We should rebel against this by dealing with small, local businesses. Those are the ones who provide most of the job growth anyway, and on transparent terms (since we know where they live, so to speak). Not just in regard to the banks though, but with any business where this is possible.
To some extent I do feel like I don’t want to do business with any of the companies that took bailout money anymore. Not only big banks, but car companies and other groups as well. I think companies need to be allowed to fail – even if they are big – and it isn’t the role of government to save companies that are “too big to fail”.
I’ve seen some of the bad business practices that the banks are engaging in through the Making Home Affordable program. Essentially instead of helping people modify their loans, they’re allowing people to go into foreclosure because even though they’ll lose more in the long run, in the short term they can keep that home loan on the books, and stay in the black. That makes it appear like they’re doing better than they are.. but of course the poor homeowner gets no help and goes into foreclosure.
Really funny yet thought provoking article. You forgot one thing: the fact of life is that people will need at some point in their lives to borrow money.
A great alternative is to let people organize themselves and form borrowing communities. Nothing new about this:
Credit Unions and P2P Lending are much better ways to accomplish this than going to a bank. My fave site is Lending Club, because of their responsible approach to borrowing.
I hadn’t actually thought about it from the perspective of terminating my affiliation with the bank itself, I’ve just been more concerned with cutting ties from the debt! The more I think about it the more I am inclined to agree though. The local credit union always has treated me better than the big banks.
If you don’t like the business model of big banks, then join a credit union, where you share in the profits.
I’m with you on this one all the way. I’ve already been able to terminate my affiliation with U.S. Bank and Citibank. When I’m done I’ll merely be a checking/deposit customer with a local credit union. It’s amazing how apathetic the giant banks have become to point of being outright rude.
Wells Fargo especially has worked me over terribly with my mortgage, which is unfortunate as that’s where I did most of my banking. Emphasize did.
I’m 100% a local credit union guy from now on. A person answers their phone. “What you say?” Yeah that’s right an actual person who is actually a teller. You call you get help, no transfers. I love it.