The Best Bank does not happen from Bank Mergers

The Best Bank for the customer is a small bank.

When Banks Merge - The Customer Loses ... again

You may or may not have noticed, but main street USA has fewer banks than it used to. That is because bank mergers are becoming a trend lately. The banking system is in survival mode, and when one bank gets in trouble, it can usually merge with another healthier bank and keep the doors open under a new name.

But does that make for the best bank possible?

The effect mergers have on the general banking public is not readily apparent, but there are several. You’ve heard it said, “when banks compete, you win.” This is a true enough statement, but with all the mergers taking place, there are fewer banks competing for your business. That means there are fewer choices for the banking public.

The simple law of supply and demand says that if the buying public has fewer choices for a particular good or service, the price of that good or service goes up. When an industry “thins out” it’s choices, that is called “creating scarcity.” So, the banks that remain in the market place can raise fees and decrease service and usually get away with it.

The numbers speak for themselves. Since 1999, the average ATM fee has increased by 60%. The average bounced check fee has gone from $21 to more than $27 in that same time period.

The big banks continue to grow, buying up all the small banks in the process. In 1999, the fifty largest banks had a market share of 22%. That means that they conducted 22% of all banking business in the country. That share now stands at 36%, and it continues to climb.

What should your response be to the changing banking industry?

If your bank merges with another bank:

· Assume that you are dealing with a whole new bank.

· Expect fees to go up, but not right away.

· Wait about 90 days, then check all accounts to see if the merger has affected your fees, services, or interest rates on savings/loans, etc.

· If you are a good customer, you can negotiate with the new bank to keep the same terms as you had with the old bank.

· If the bank will not negotiate, shop around. For now, the financial market is still highly competitive. Many banks and credit unions offer solid terms for their customers.

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