If your tuning in for the first time, welcome to the Community Based Business page. A grass roots movement to start a better business world, one person at a time. We aren't smarter than you, I'm sure we've made more mistakes, and I'm confident we don't make as much bling. We have however, learned some things over the years and come up with some ideas and models that not only work, but help make the world a better place. So off we go into Financial Institutions.
Some people might think that choosing the right financial institution to work with is as simple as the cheapest one, that provides the right products. Unfortunately, its a bit more complicated. Some of us are slow learners and have found this out the hard way. Hopefully you are better at it than we where.
First of all lets return to our community based business basics. We previously learned that there are 5 things we need to filter our business through in order to qualify to be a good community based business.
1.) Profitable
2.) Honest-has the highest level of Integrity
3.) Treats people, like they deserve, as people
4.) Eco-friendly
5.) Community oriented
If you don't fully understand these concepts, please take a step back and read the previous blog.
When choosing a financial institute to do business with we are going to first return to what we have already learned. It will get a little bit more difficult once we get into it, but the same rules apply. Lets start at number two.
2.) Does this financial institution have the highest level of Integrity? This is sometimes difficult to tell, but with a little digging, you should be able to figure it out. Especially after the last 10 years of financial turmoil. I would say a good place to start is, who did they lend their money to when we practiced 'loose lending?' Did they follow the trends of the big boys and just lend to all? Did they have a 45 minute auto HELOC (Home equity line of Credit) that used an auto appraisal? Did they need a government bail out? If any of these questions are answered YES, then you have cause for concern.
Read up on your institutions news paper articles, what do people say? A good institution would have keep to its standard of lending, not required government assistance, not given you a 45 minute loan that's worth 65 percent of the value of your house! Where do they invest YOUR money? Was it Mortgage securities? Hedge funds? Stocks? Its ok to invest some high risk parts in these, but did they have large quantities of money in these areas? Unless your money was designated as high risk investing it should not be used for high risk investing. Seems like simple ethics doesn't it?
How does your financial institution rank with its members? This is one of the most important factors. What type of members does it attract? Think of it like Bob's Back Door Auto Sales. Bob sells shady cars, to shady people for a shady price. If your bank attracts shady people, its probably a shady bank. If your bank consistently has adds like 'start a checking account get a free ipod.' It could be a.) attracting the wrong people b.) attracting them not for their products, but their toys. In Despicable Me the Evil people go to the Evil Bank, just like real life. Have I said enough yet? If your financial institution, the people who work their, or the people who bank their seem to lack integrity its likely the institution as a whole lacks integrity. regardless of what their commercials say.
3.) treats people like people. A good start on this one is just read the reviews on the Google! You will find very quickly what people think about that institution. Although, like taking averages back in math, its always good to throw out the best and the worst to get a more accurate view. Can the branch manager help you deal with a problem? Do the rules bend sometimes (not all the time) for extenuating circumstances? They should, and if they don't, your getting treated like a robot, not a living, breathing, person. This is NOT an excuse for delinquency or irresponsibility, and a good financial institution will separate the wheat from the chaff in this matter.
4.) Does your bank even know what eco-friendly is? Do you have a paperless option? Do they buy wind power? Do they recycle their paper? My personal favorite, Do they give perks to those who ride the bus, walk, or ride a bike to work? Did they finance the nuclear waste facility that was built down the street? This one is a bit harder to deal with, but still important. Eco-friendly unfortunately foreshadows integrity.
5.) Community Oriented. Does your financial institution support the local community? Who financed the baseball field, was it Wells Fargo, The Soccer Moms Association, or Home Town Bank? It should have been your local financial institution. Do they have a stake in the community at all? When they financed the ball park was it at 12% interest or .25%? Wells Fargo would have done it for 12% so would have the Loan Shark down the street. Do they sponsor food drives? Super youth programs? Are they involved at all?
Finally we will talk about profitability. This means 2 things in this case. First, and foremost: Is the bank profitable for you to use. If you do 500 transactions a day, and they charge $2 per transaction, then probably not, unless your transactions a over 1K each. What if they cant give you overdraft protection and you have a gap between getting payed and spending every month where you need it. Then no, its not profitable. What if they charge $500 a year to have the account yet your profit margins a $600 a year? not profitable. What if everything is free but all you get is a check book and you do all your business with wire transfers, ACH transfers, and online bill pay? Not profitable. So you need an institution that provides the services you need at a price that you can afford. Second question relates to the institution. are THEY profitable. This brings up the Credit Union vs. bank question. Whats the difference and who cares?
Credit Union: A not for profit organization designed to support the financial needs of its members. For more (http://www.cuna.org/gov_affairs/legislative/cu_difference.html) Unfortunately its not that easy, they are not created equal. Some are very good, some very bad. You still have to apply the above tests to see if they are a good financial institution. Under the new law Credit Unions have less restrictions than banks like less required capital on hand. Could this mean more risk at your credit union? Absolutely! Don't take my word for it, check out how many credit unions went under in the last 8 years. The reason behind the law is that Credit Unions fate are defined by its members, so they should be aloud to throw themselves off a bridge if the so chose. In the case of a bank, your CEO, Share holders, executive board, and board of directs defines your fate. (seriously who pays all those salaries anyway?) Thus the government must watch and restrict their choices since you cant.
Bank: dictionary definition: heap. Probably the most accurate description of banks today. A heap of.... Ok, maybe a little harsh, but based on how our US banks have acted in the last 10 years, not too far off. A Bank is FOR PROFIT. Or their main goal is to make money, its not controlled by the members, only the government, and very loosely up until now. Banks require a higher percentage of capital on hand, more government accountability. These are good things, since they really care about profit, not you. Banks also offer more options, more loans, more ways to send money, more stuff. Wells Fargo, for example, actually loans its own money so they can do more with a lone. Banks can also be more universal. Ever found an ATM from your Credit Union on the other side of the country? How about a Wacovia, or a Chase, or a Wells Fargo? Probably in every town. So yes they are more convenient to the world traveler. They have more money to throw around too. So a bank may be your only option, if it is... chose wisely because you will regret it, hopefully only a little.
One real life experience story, in fact the story that started it all, to help illustrate the point. Business A chose Washington Mutual as its bank because it advertised free business checking (not different than free child care while banking, or free moca latte for first 500 new accounts), after a few years WAMU made some poor choices and got swallowed by Chase. Business A then continued to work with chase since their checking was free. Even though they had no overdraft protection (because chase wouldn't approve it) and charged $35 per overdraft, or $15 more than the local credit union. Chase couldn't set up an automatic payment plan for Business A's Costumers either, so manager G would have to continually remind costumers to make their payments. And when they didn't manger G would have to pay his $35 overdraft charge per customer, since Chase wouldn't get him overdraft protection. One of manger G's customers also pointed out to Manager G that Chase also conveniently waited tell Manger G would barely overdraft and then quickly and efficiently process all possible charges on the account to have the highest number of overdrafts possible. Thanking said Customer, manager G started to look critically at Chase's overall custom care and concluded that it was very poor. Then Manager G threatened to close his account and magically overdraft protection materialized. So manager G, aware of the pain associated with opening a new business account, decided to stay with Chase. When manager G with Joy first used his overdraft protection, he realized that Chase failed to inform him that their was a $20 charge for using overdraft protection, per occurrence. Ironically the same cost of an overdraft at his local Credit Union. Manager G no longer had any trust in Chase, in fact Manager G now disliked chase for being deceitful and not revealing all the hidden charges. He would change his account. Manager G got busy and didn't change his account, but in January 2011 Chase announced a $17 per month charge on all business accounts. That was the last straw, Manager G went into chase to close all accounts. Chase branch manager talk and talked about this and that... but all Manager G could hear was 'blah, blah, blah' because he knew that Chase was no longer trust worthy. Truth be told, Chase got even worse. Manager G had a loan from Chase that was payed automatically each month with a checking account. Manager G changed the account to his new one with the Chase branch manager. Chase branch manager filled out the documents for Manager G and sent him on his way. Manager G later received a letter from Chase stating not enough information was included... in the form that Chase filled out. Manager G then returned to Chase where Chase again filled the form out and sent it in. The due date passed, no word from Chase. Manager G was relieved he would never have to visit Chase again. Then, Manager G receives a payment late notice with late charge along with 'not enough information' letter again. Manager G is Furious! Manger G goes to talk with Chase and Chase blames Chase. Chase fills out another form for Manager G and sends it to Chase promising the problem solved. Meanwhile Manager G's accountant finds $100 missing and traces it to a check Chase over payed. Chase looks into missing $100 then response by saying 'since you don't have an account with us, we can't just write you a check, sorry.' One week later, Manager G gets another letter stating 'not enough information to process your automatic payment.'
Manager G unfortunately is limited by his integrity to do the right thing, unfortunately Chase has no such integrity.
So after all of that If you can, chose your local credit union but first take them through this process to make sure its a good company. Even a Credit Union is only as good as its members. A Credit Union can be just as bad as a Bank, but a Bank can never be as good as a Credit Union.
Some people might think that choosing the right financial institution to work with is as simple as the cheapest one, that provides the right products. Unfortunately, its a bit more complicated. Some of us are slow learners and have found this out the hard way. Hopefully you are better at it than we where.
First of all lets return to our community based business basics. We previously learned that there are 5 things we need to filter our business through in order to qualify to be a good community based business.
1.) Profitable
2.) Honest-has the highest level of Integrity
3.) Treats people, like they deserve, as people
4.) Eco-friendly
5.) Community oriented
If you don't fully understand these concepts, please take a step back and read the previous blog.
When choosing a financial institute to do business with we are going to first return to what we have already learned. It will get a little bit more difficult once we get into it, but the same rules apply. Lets start at number two.
2.) Does this financial institution have the highest level of Integrity? This is sometimes difficult to tell, but with a little digging, you should be able to figure it out. Especially after the last 10 years of financial turmoil. I would say a good place to start is, who did they lend their money to when we practiced 'loose lending?' Did they follow the trends of the big boys and just lend to all? Did they have a 45 minute auto HELOC (Home equity line of Credit) that used an auto appraisal? Did they need a government bail out? If any of these questions are answered YES, then you have cause for concern.
Read up on your institutions news paper articles, what do people say? A good institution would have keep to its standard of lending, not required government assistance, not given you a 45 minute loan that's worth 65 percent of the value of your house! Where do they invest YOUR money? Was it Mortgage securities? Hedge funds? Stocks? Its ok to invest some high risk parts in these, but did they have large quantities of money in these areas? Unless your money was designated as high risk investing it should not be used for high risk investing. Seems like simple ethics doesn't it?
How does your financial institution rank with its members? This is one of the most important factors. What type of members does it attract? Think of it like Bob's Back Door Auto Sales. Bob sells shady cars, to shady people for a shady price. If your bank attracts shady people, its probably a shady bank. If your bank consistently has adds like 'start a checking account get a free ipod.' It could be a.) attracting the wrong people b.) attracting them not for their products, but their toys. In Despicable Me the Evil people go to the Evil Bank, just like real life. Have I said enough yet? If your financial institution, the people who work their, or the people who bank their seem to lack integrity its likely the institution as a whole lacks integrity. regardless of what their commercials say.
3.) treats people like people. A good start on this one is just read the reviews on the Google! You will find very quickly what people think about that institution. Although, like taking averages back in math, its always good to throw out the best and the worst to get a more accurate view. Can the branch manager help you deal with a problem? Do the rules bend sometimes (not all the time) for extenuating circumstances? They should, and if they don't, your getting treated like a robot, not a living, breathing, person. This is NOT an excuse for delinquency or irresponsibility, and a good financial institution will separate the wheat from the chaff in this matter.
4.) Does your bank even know what eco-friendly is? Do you have a paperless option? Do they buy wind power? Do they recycle their paper? My personal favorite, Do they give perks to those who ride the bus, walk, or ride a bike to work? Did they finance the nuclear waste facility that was built down the street? This one is a bit harder to deal with, but still important. Eco-friendly unfortunately foreshadows integrity.
5.) Community Oriented. Does your financial institution support the local community? Who financed the baseball field, was it Wells Fargo, The Soccer Moms Association, or Home Town Bank? It should have been your local financial institution. Do they have a stake in the community at all? When they financed the ball park was it at 12% interest or .25%? Wells Fargo would have done it for 12% so would have the Loan Shark down the street. Do they sponsor food drives? Super youth programs? Are they involved at all?
Finally we will talk about profitability. This means 2 things in this case. First, and foremost: Is the bank profitable for you to use. If you do 500 transactions a day, and they charge $2 per transaction, then probably not, unless your transactions a over 1K each. What if they cant give you overdraft protection and you have a gap between getting payed and spending every month where you need it. Then no, its not profitable. What if they charge $500 a year to have the account yet your profit margins a $600 a year? not profitable. What if everything is free but all you get is a check book and you do all your business with wire transfers, ACH transfers, and online bill pay? Not profitable. So you need an institution that provides the services you need at a price that you can afford. Second question relates to the institution. are THEY profitable. This brings up the Credit Union vs. bank question. Whats the difference and who cares?
Credit Union: A not for profit organization designed to support the financial needs of its members. For more (http://www.cuna.org/gov_affairs/legislative/cu_difference.html) Unfortunately its not that easy, they are not created equal. Some are very good, some very bad. You still have to apply the above tests to see if they are a good financial institution. Under the new law Credit Unions have less restrictions than banks like less required capital on hand. Could this mean more risk at your credit union? Absolutely! Don't take my word for it, check out how many credit unions went under in the last 8 years. The reason behind the law is that Credit Unions fate are defined by its members, so they should be aloud to throw themselves off a bridge if the so chose. In the case of a bank, your CEO, Share holders, executive board, and board of directs defines your fate. (seriously who pays all those salaries anyway?) Thus the government must watch and restrict their choices since you cant.
Bank: dictionary definition: heap. Probably the most accurate description of banks today. A heap of.... Ok, maybe a little harsh, but based on how our US banks have acted in the last 10 years, not too far off. A Bank is FOR PROFIT. Or their main goal is to make money, its not controlled by the members, only the government, and very loosely up until now. Banks require a higher percentage of capital on hand, more government accountability. These are good things, since they really care about profit, not you. Banks also offer more options, more loans, more ways to send money, more stuff. Wells Fargo, for example, actually loans its own money so they can do more with a lone. Banks can also be more universal. Ever found an ATM from your Credit Union on the other side of the country? How about a Wacovia, or a Chase, or a Wells Fargo? Probably in every town. So yes they are more convenient to the world traveler. They have more money to throw around too. So a bank may be your only option, if it is... chose wisely because you will regret it, hopefully only a little.
One real life experience story, in fact the story that started it all, to help illustrate the point. Business A chose Washington Mutual as its bank because it advertised free business checking (not different than free child care while banking, or free moca latte for first 500 new accounts), after a few years WAMU made some poor choices and got swallowed by Chase. Business A then continued to work with chase since their checking was free. Even though they had no overdraft protection (because chase wouldn't approve it) and charged $35 per overdraft, or $15 more than the local credit union. Chase couldn't set up an automatic payment plan for Business A's Costumers either, so manager G would have to continually remind costumers to make their payments. And when they didn't manger G would have to pay his $35 overdraft charge per customer, since Chase wouldn't get him overdraft protection. One of manger G's customers also pointed out to Manager G that Chase also conveniently waited tell Manger G would barely overdraft and then quickly and efficiently process all possible charges on the account to have the highest number of overdrafts possible. Thanking said Customer, manager G started to look critically at Chase's overall custom care and concluded that it was very poor. Then Manager G threatened to close his account and magically overdraft protection materialized. So manager G, aware of the pain associated with opening a new business account, decided to stay with Chase. When manager G with Joy first used his overdraft protection, he realized that Chase failed to inform him that their was a $20 charge for using overdraft protection, per occurrence. Ironically the same cost of an overdraft at his local Credit Union. Manager G no longer had any trust in Chase, in fact Manager G now disliked chase for being deceitful and not revealing all the hidden charges. He would change his account. Manager G got busy and didn't change his account, but in January 2011 Chase announced a $17 per month charge on all business accounts. That was the last straw, Manager G went into chase to close all accounts. Chase branch manager talk and talked about this and that... but all Manager G could hear was 'blah, blah, blah' because he knew that Chase was no longer trust worthy. Truth be told, Chase got even worse. Manager G had a loan from Chase that was payed automatically each month with a checking account. Manager G changed the account to his new one with the Chase branch manager. Chase branch manager filled out the documents for Manager G and sent him on his way. Manager G later received a letter from Chase stating not enough information was included... in the form that Chase filled out. Manager G then returned to Chase where Chase again filled the form out and sent it in. The due date passed, no word from Chase. Manager G was relieved he would never have to visit Chase again. Then, Manager G receives a payment late notice with late charge along with 'not enough information' letter again. Manager G is Furious! Manger G goes to talk with Chase and Chase blames Chase. Chase fills out another form for Manager G and sends it to Chase promising the problem solved. Meanwhile Manager G's accountant finds $100 missing and traces it to a check Chase over payed. Chase looks into missing $100 then response by saying 'since you don't have an account with us, we can't just write you a check, sorry.' One week later, Manager G gets another letter stating 'not enough information to process your automatic payment.'
Manager G unfortunately is limited by his integrity to do the right thing, unfortunately Chase has no such integrity.
So after all of that If you can, chose your local credit union but first take them through this process to make sure its a good company. Even a Credit Union is only as good as its members. A Credit Union can be just as bad as a Bank, but a Bank can never be as good as a Credit Union.
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