Small Banks Getting Popular With Consumers

During the past few months, the bigger banks in the country have been busy changing policies in their attempts to get ahead of the consumer friendly reforms of the Credit CARD Act. Signed into law last May of 2009, this Credit CARD Act imposes new regulations to the credit industry which will stop banks from preying on consumers. A large part of this act will be activated this coming February.

Because of changes that the Credit CARD Act brings, large banks and lenders are facing billions of dollars in losses. They are trying to make up for it by raising their credit card interest rates, jacking up fees, introducing new fees and several other similar policy changes. A lot of consumers have been hurt by these changes. A lot of them are also voting with their feet and moving business elsewhere.

At the moment, smaller banks and lenders are seeing an increase in their customer base. A lot of these new customers are moving from larger outfits. Many of them are angry over what bigger banks and lenders are doing. Others are looking for better, more personalized service.

During this economic crisis, a lot of small, community banks were able to avoid disaster. They were able to do so primarily because they did not offer predatory lending practices that most of the major banks were doing which ultimately contributed a lot to the economic problems of the country. Because they made out well during this crisis, a few of these smaller banks are still offering to lend money to consumers and are still offering a number of products to consumers at very competitive rates.

Small banks and lenders are not the only ones seeing a rise in customer base either. Credit unions are also seeing a surge in interest among consumers as well. Like major banks, credit unions also offer a number of products and services. However, they offer much lower interest rates and fees.

Still, consumers need to be aware that not all small banks are doing very well. According to research from ABC News, of all banks that failed during the last year, small banks accounted for 81%. It is also expected that more banks will fail this year.

For consumers who are looking into moving to smaller banks for their savings or checking account and for other banking products, it is important to first investigate what they are being offered and to check if the bank shows any signs of failure. A major concern is to check if the bank is properly insured by the FDIC or Federal Deposit Insurance Corp.