Mark and Roberta Maxwell had been zapped by fees for overdrawing funds and using the wrong ATM, and they felt their bank, the former Washington Mutual, had lost its personal touch since a takeover by Chase.

Adding insult to injury, Roberta said, they had to pay a special fee for depositing more than $5,000 in cash to their small-business account in a single month — something they might do again because Mark, a saxophone player, earns much of his living selling his smooth-jazz CDs at street fairs.

“I thought banks were supposed to want you to put more money in them,” Roberta said.

So the Maxwells moved their account last year to the Studio City office of the Musicians’ Interguild Credit Union, joining what could be the vanguard of angry consumers abandoning major banks in favor of smaller ones.


It’s an appealing notion in an era of outrage over the huge bailouts and high fees of the big banks. Consumers are much more willing to switch banks than they were before the financial crisis, according to a recent survey by market research firm J.D. Power & Associates. Two-thirds of the big-bank customers surveyed said they would consider jumping to a smaller institution.

It’s too soon to tell whether switch-your-bank campaigns, including the Move Your Money crusade undertaken by website entrepreneur Arianna Huffington, have prompted a significant number of bank customers to trade down.

The big banks aren’t exactly giving up on you. In California, in fact, they’re battling one another for market share. And, to be fair, it’s hard to beat them for convenience, cutting-edge technology, pervasive automated teller machines that are free to customers, and a variety of options for deposits and other products.

For example, the Maxwells could have increased the amount of cash they were allowed to deposit each month without incurring a fee to $10,000 or even $25,000 — if they had sat down with a Chase small-business specialist and discussed alternative types of deposit accounts, said Gary Kishner, a spokesman for Chase, a unit of JPMorgan Chase & Co.


At Bank of America, the country’s largest bank, first-year Chief Executive Brian T. Moynihan is spearheading an effort to encourage employees to put customers’ needs first instead of simply maximizing revenue, a strategy that sounds much like marketing pitches for smaller banks and credit unions.

There are pitfalls as well as potential benefits in switching. If you’re thinking about it, here are some issues and options to consider.

Credit unions

If you’re a regular consumer seeking an alternative to the big banks, a credit union might be your best bet.


“Consumer banking is what credit unions do,” said Edward J. Carpenter, an Irvine investment banker who has advised hundreds of start-up banks.

Credit unions don’t actually have customers; they have members. To join one, you have to be in a group the credit union serves. But it’s usually easy to find credit unions you can join. One may serve residents of the area you live in. Another may cater to employees at your workplace. To search for one, go to the National Credit Union Administration website.

Services vary greatly, but many credit unions offer a wide range of deposit options, auto and home loans, credit cards, and even loans for boats and RVs. Some provide small-business banking and investment advisory services. Through alliances, credit union members can access ATM networks of as many as 25,000 machines free of charge.

Because they pay no taxes and are organized to benefit members, not shareholders, credit unions generally are able to pay higher interest rates on deposits than banks — and charge lower rates on credit cards and auto loans. Mortgage rates tend to be about the same.


For many people who switch to credit unions, fees may be the biggest difference they notice. A study last year by economists at UC Davis and Dartmouth College found that fees for overdrafts at credit unions averaged $23, compared with $33 at banks. The typical credit union charge for using an out-of-network ATM was $1.50; at banks it was $2.50.

Although they tend to take on much less risk than the megabanks do, credit unions, like all consumer lenders, have suffered loan losses in recent years, some more than others. At the end of 2009, 64 California credit unions had the equivalent of a D or F on their confidential regulatory report cards, five times the number at the end of 2006, said John J. McKechnie III, spokesman for National Credit Union Administration, which regulates federally insured credit unions.

Keep reading for tips on how to check out the stability of a credit union or bank.

Community banks


If you’re considering a community bank, make sure it’s a good fit for you by talking with officials at the bank and maybe even some customers. The reason: Community banks generally are set up to accommodate the needs of small businesses, not the average person with a small checking and savings account.

“Consumer accounts are very hard to deal with from a regulatory standpoint, and you need a bunch of them to do it efficiently,” said Anaheim-based bank consultant Gary S. Findley. Banks with less than $500 million in assets generally aren’t in a position to do much for consumers, he said.

What’s more, Findley said, small banks are devoting so much attention to raising fresh capital and working out troubled real estate loans that they might not be as free as they’d like to make new loans.

In the middle


A notch up the food chain are larger regional banks with the wherewithal to do consumer business if they choose. But many of them also are still digging their way out from losses, or don’t aim their services at the mass market, or both.

The “find a bank or credit union” button atop the Move Your Money website launched by Huffington can give potential switchers a list of local, financially sound smaller banks. In Southern California, the list includes City National Bank, an L.A.-based lender with $20 billion in assets, and Pasadena’s OneWest Bank, a $28-billion thrift that emerged from the wreckage of failed IndyMac Bank.

However, City National, once known as Beverly Hills’ “bank to the stars,” doesn’t provide many services that everyday consumers might want. Auto loans? No way, unless as a favor to a longtime client who, say, collects antique cars. And the bank’s $3.5-billion mortgage portfolio holds loans custom-tailored to wealthy borrowers with an average of 43% equity in their homes.

As a savings and loan, OneWest is friendlier to the average consumer, offering home loans, savings accounts, certificates of deposit and checking accounts — but no credit cards or auto loans.


Big but not so big

Other possibilities are the large but not gigantic banks that received the highest ratings in California in the J.D. Power survey: Bank of the West, with $60 billion in assets, and Union Bank, with $85 billion.

Both offer consumer as well as business services and have giant parent companies based overseas: France’s BNP Paribas owns Bank of the West, while Japan’s Bank of Tokyo-Mitsubishi UFJ owns Union Bank.

Strong financial support from Bank of Tokyo-Mitsubishi, including a $2-billion capital infusion last September, has made it easier for Union Bank to weather the financial crisis without sacrificing customer service, said Tim Wennes, Union Bank’s chief retail banking officer.


Bank of the West is “small enough that you can take a community bank approach” while offering a full range of products, said Andy Harmening, a senior executive vice president.

Check ‘em out

Because the financial health of credit unions and small banks and thrifts can vary significantly, it’s a good idea to check them out online. You can view independent soundness ratings free at Bankrate.com or from Bauer Financial Inc.

In addition, credit unions’ quarterly reports to regulators are available online. Similar data from banks and thrifts are available from the Federal Deposit Insurance Corp.


Regardless of how big or how highly rated your financial institution is, make sure you stay under the federal deposit insurance coverage limit of $250,000 per customer.

The bottom line

For many people, a bigger bank may be better. But if you can find the right one for you, a small institution may simply try harder to make you happy. Even in online banking, which is dominated by large banks, a survey this year awarded the highest satisfaction ratings to credit unions, and smaller banks outshined the five biggest institutions.

“While the big companies try to outdo each other with lots of flashy bells and whistles, the small banks have had to keep their focus on satisfying the customer because that’s the only way they can compete,” said Larry Freed, president of research firm ForeSee Results, which conducted the survey for Forbes.com. “And as the data shows, it’s paid off.”


scott.reckard@latimes.com