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'Bank Transfer Day' Won't Hurt Big Banks -- Why You Should Switch Banks Anyway

Stocks in this article: BAC

4) The biggest headache at the TBTF banks is getting something fixed, or finding the right department, or getting through the automated phone tree. Make sure that the service the CB or CU offers is personalized, and performed by a local real person who cares and to whom you have easy access.

5) Ask what the policy is on check holds. An archaic 1988 law allows banks to "hold" checks for up to 14 days in some instances. Because they don't "know" you, the TBTF banks are more likely to put "holds" on your deposits if they contain other people's checks. That 1988 law should be repealed because today, electronic clearing occurs overnight for 99% of all checks. But you already know that the U.S. Congress never repeals anything, no matter how archaic or silly it may be in today's world.

6) Every bank has to process checks. But, how they process them is key, and the answer you receive from this question is a good indicator of how consumer friendly the CB or CU really is. All TBTFs process debits (your checks) first in the order of highest to lowest amount. They process deposits last. By doing this, they maximize their insufficient fund fees, because, by charging the big checks first, they increase the number of "insufficient" fund or "bounced" check fees they can impose if you have several smaller items clearing that same day. And you get the insufficient fund charges even if you made a deposit that day that would cover the checks - because it is processed last. Small banks do just the opposite. They process deposits first, then your checks in the order of smallest to largest, thus minimizing "insufficient" fund fees.

The table below shows an example of this process. The consumer began this morning with a $1,000 cleared balance and the following checks are in the queue to clear: $30, $80, $5, $950, $100. The consumer also deposited $250 in cash the minute the bank opened for business in this morning. The bank charges $20 as its "insufficient funds" fee. (Most TBTF banks charge more than that!) The first table is the way the TBTF banks operate; the second table shows the same set of transactions cleared in a consumer friendly way:

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