Consumers considering changing banks may want to check out a new web tool set up by the Center for Responsible Lending (CRL). The Shopper's Guide to Better Banking, released on Monday, allows consumers to rank their existing or prospective bank by answering questions about their checking account practices, credit card terms and cash advances.

“Consumers can’t make good choices without good information,” Kathleen Day, spokeswoman for the Center for Responsible Lending, told MainStreet. “The tool was designed to offer guidance on how to select a bank that best fits your needs.”

Day explains that prior to the financial crisis consumers were subject to the whims of big banks who felt no pressure to make their offerings more competitive.

“Banks would shrug off customer complaints and say ‘well, if you don’t like it, you can take your money elsewhere,” she says. “The problem is all banks were offering identical products.”

Now, as a result of The Credit Card Accountability Responsibility and Disclosure Act of 2009 and financial reforms, there are some differences between these institutions. Bank of America (Stock Quote: BAC) for example, chose not to charge fees incurred through overdraft protection after other banks, such as CitiBank, stopped doing so.

The tool enables consumers to more readily identify these disparities by asking a series of questions concerning the fine print of a bank’s terms and conditions. Users give the bank a negative rating (red flag) or positive one (green flag) for each feature, and then rate their bank's overall performance at the end.
The guide is designed to help consumers evaluate banks based on their own needs, as what’s right for one person isn’t always a fit for another. For example, Day explains, those who intend on paying their credit card balances off on time may not flag a bank that has high penalty fees associated with delinquency.

The tool does offer suggestions on what bank practices should yield a red flag. Some examples include:

  • Not allowing customers to link their checking account to a savings account or line of credit, as doing so can be a cheap way to cover overdrafts. The tool also instructs customers to ask what the bank charges to move money among their accounts, and how often it charges a fee for this type of transfer, since these vary from institution to institution.
  • Using “behavioral scoring” to determine creditworthiness. Any changes in your terms should be based on your credit profile, not your shopping habits.
  • Charging more than 36% interest on short term loans or cash advances. Banks sometimes disclose the interest rates associated with a cash advance as a ratio to dollar amount, but you can ask for the annual percentage rate, as they are required by law to disclose them. For example, a cash advance with a fee of $10 per $100 borrowed actually carries an APR ranging anywhere from 120% to over 1,000%, depending on how you wait to pay it back. If you have two weeks to pay it, the APR is 260%.

For more information on banks with the worst APR penalty policies, check out this MainStreet article.

Those who want to learn more about picking a great bank can access the full guide on the CRL’s website.

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