How the FDIC Affects Your Wallet

You might be surprised to learn that the FDIC is not funded by tax payer revenue, so it receives no Congressional appropriations. Rather, it’s funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. With an insurance fund totaling more than $45 billion, the FDIC insures more than $5 trillion of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.

Banks and thrift institutions have to comply with a host of regulations and safe operating guidelines designed to protect depositors and their money. In many ways, the FDIC could be considered a consumer protection agency as it supervises and regularly examines insured banks to make certain they are operating in safe and sound ways, thus protecting customers and their deposits.

On October 3, 2008, FDIC deposit insurance temporarily increased to $250,000 per depositor through December 31, 2009, but there is legislation currently proposed in Washington to keep the $250,000 coverage permanent. Many experts believe this will pass with little resistance, but only time will tell.

Your money in savings, checking and other deposit accounts, when combined, is generally insured to $250,000 per depositor in each bank or thrift the FDIC insures. Deposits held in different categories of ownership – such as single or joint accounts – may be separately insured. Also, the FDIC generally provides separate coverage for retirement accounts, such as individual retirement accounts (IRAs) and Keoghs, insured up to $250,000. The FDIC’s Electronic Deposit Insurance Estimator can help you determine if you have adequate deposit insurance for your accounts. We’ll cover ownership categories in more detail in our next installment.

The FDIC, Your Bank, and You

We’re launching our blog with a short series of posts dedicated to how we work with the Federal Deposit Insurance Corporation, or FDIC, to protect your hard-earned cash. (With bank failures and economic doom-and-gloom all over the news we thought it a good place to start.) But before we get into specifics, we need to provide a brief history of the FDIC and its role as a consumer protector.

The FDIC was created as an independent agency of the federal government in 1933 in response to the bank failures of the 1920’s and early 1930’s. The FDIC is headquartered in Washington, D.C., but conducts its business in Utah from a field office in Salt Lake City. This field office works closely with the Utah State Department of Financial Institutions to oversee the safety and soundness of many of the state’s banks, including Western Community Bank. Since the start of the insurance program on January 1, 1934, no depositor has lost a single cent of FDIC-insured funds from a bank failure.

The FDIC insures deposits only. It does not insure securities, mutual funds or similar types of investments that banks and thrift institutions may offer. (See Insured and Uninsured Investments on the FDIC website to determine what is and is not protected by FDIC insurance.)

Upcoming installments will cover “How the FDIC Affects Your Wallet,” “How to Make the Most of FDIC Insurance Coverage” and “How the FDIC Affect’s Your Bank’s Service.” We hope these posts will help you gain a better understanding of how you can better protect your hard-earned cash, and how your bank is working to protect you.

Make the Most of FDIC Insurance

Our last post made reference to the FDIC’s Electronic Deposit Insurance Estimator, or EDIE, to help you determine if you have adequate deposit insurance for your accounts. Today we’ll delve further into ways you can make the most of available FDIC deposit insurance coverage.

Perhaps one of the best features of FDIC deposit insurance is that’s free. You qualify for it simply by opening a qualified deposit account at an FDIC insured bank. How much insurance you can receive is a different matter. The amount of coverage is based on factors such as the amount of money you have in an insured bank, the type of account, and the kind of ownership category the account falls into.

You can never receive more money than you have in your deposit account. Traditionally, the FDIC has insured deposits up to $100,000 per depositor, but on October 3, 2008, FDIC deposit insurance temporarily increased to $250,000 per depositor through December 31, 2009. So this means if you and your family have $250,000 or less in all of your deposit accounts at the same insured bank or savings association, you do not need to worry about your insurance coverage – your deposits are fully insured. A depositor can have more than $250,000 at one insured bank or savings association and still be fully insured provided the accounts meet certain requirements

You may qualify for more coverage if you own deposit accounts in different ownership categories. The best source of information regarding ownership categories is the FDIC. So to help you determine how you can establish your accounts in the proper ownership categories and to help you maximize your coverage, we suggest you take some time to review the information on the FDIC’s insurance coverage info page.

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The Princess and the Penny

Do you remember the story of the Princess and the Pea where a pea is placed below a ridiculous stack of mattresses to help a desperate prince determine if a traveler claiming to be a princess really is a princess? The prince thought if the woman could feel a pea through all those mattresses that she had to be a princess, because “only a princess could have skin so delicate” as to feel that small irritating pea under all of those mattresses. Sure enough, the woman proved to be a princess. She did not sleep all night because she could feel the tiny irritant under all the mattresses. Imagine what she would think today sleeping on one mattress with a penny-or a stash of money-stuffed under it.

Admittedly, this story is recalled in order to make a point: As bad as the economy is, or may get, the mattress is not the smartest way to save. If you don’t want to loose sleep over the safety of your money, or sleep with an annoying lump in your bed, do some homework and find a safe and secure bank where you can open a simple savings account. You will have greater peace of mind knowing your money is FDIC insured and that your bank is working hard to deserve your trust.

Remember that the bank failures you’re hearing about in the news are typically large banks, and that there are thousands of smaller institutions, like community banks, that continue to operate in safe and sound ways. What’s more, your local community bank is most likely owned, managed, and operated by people in your community who understand your needs, the local economy, and the issues that affect your neighborhood.

Resist the temptation to open a “restless-nights-sleep account” and open a simple savings account at a trusted local community bank instead. You’ll sleep better.

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Benefits of “Going Local”

“The past few years have seen increased emphasis on “going local,” or supporting local communities by consuming products that are produced and sold by independent organizations rather than big-box, franchised retailers,” according to American Fork City Councilman, Dale Gunther in an article published in the February 2009 Utah County Business Journal. “The trend has really taken off…because it helps local communities thrive by reinvesting local dollars at home.”

“While it’s natural to think of products such as produce and art as part of the “going local” movement,” Gunther continues, “one product that is often overlooked is the community bank. Yes, the community bank is indeed a local product that supports local communities.”

So what are some benefits to banking with a local community bank? Here are a few cited by Mr. Gunther:

• “Community banks are locally owned and geographically centralized. This means the money deposited by citizens in your town is generally loaned back to citizens in your town” – not citizens or businesses in other states or even counties.
• “Local management also means faster decision making and less red tape.”
• “At community banks, there are fewer layers to get to the top, which means you have easier access to executives.”
• The employees of community banks are almost always from the community. They “know the community and have been working at the bank long enough to know how to best meet the needs of the community. They know the market and have a vested interest in seeing the local economy succeed.”
• Smaller banks are better to work with you when you have problems with your account. “[They] work with you to avoid fees in the first place and, when incurred, they don’t sting as much as those of their bigger brethren.”

When you consider “going local,” do as Mr. Gunther suggests and “realize that as much as spending locally lifts communities, saving and borrowing locally does, too,”

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“How much should I have in savings?”

It’s not often that I read the magazines in the break room–partly because I could care less what’s going on with Brangelina or because I have no interest in making cupcakes look like butterflies. But I confess to opening the April 1, 2009 issue of Family Circle Magazine a few days ago and stumbling upon an article by Kate Ashford titled “Financial Planner.” The article was shorter (much shorter) than I expected, but there were some good bits of advice.

“Confused by the economy?” Ms. Ashford begins, then answers four (only four, mind you) finance-related questions. I’m not going to repeat them all–you can click the link to the article above if you want to read the entire piece. The third question and response is worth sharing here because I hear this question with some regularity when I’m in the bank, and when people I meet find out I work at a bank:

“Q. How much should I have in savings?

A} At least six months of living expenses. The general rule of thumb has always been that dual-income families should have three to six months of living expenses accessible in a savings account…But fewer than 40% of adults have enough in savings to tide them over for even three months, according to Bankrate.com. And now that the economy is so uncertain, experts are leaning toward six months. “If someone loses his job, it’s anybody’s guess how long it will take to become employed again,” says Donald E. Whalen, a certified financial planner in Alpharetta, Georgia. But don’t get overwhelmed by the thought of having to save so much money-”living expenses” doesn’t mean cash for leisure activities. It’s the money needed to cover bare essentials, like mortgage, food, and health insurance.”

To beef up your emergency fund:

A) Set up a weekly automatic debit from your checking account into a high-interest savings account, and increase the amount when you can.

B) Raise the deductibles on your home and auto insurance, or shop around for a better deal, and then stow the difference in a savings account.

C) When you finish paying off a credit card, keep making payments-to your emergency fund.

D) Try bundling expenses (like getting phone, Internet and cable from one company) then stash the savings.”

These are great ideas, and the emphasis is clear: Look for places to cut expenses and then save the money rather than spend it. For more ideas on how to save money, check out some of our past posts.

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Half-empty or Half-full?

The US Department of Labor released a report today stating that the national unemployment rate rose to 8.5% in March 2009 — the highest level since 1983. At the risk of sounding a little heartless: So what? What does this often quoted statistic mean to me and you? It’s 8.5% of what? How does Utah, or Utah County, or Orem, Lindon, Pleasant Grove, or American Fork fit into this statistic? These are all good questions that deserve some attention. So here goes…

The unemployment rate is a measure of the percentage of the work force that is unemployed at any given date–which means that 91.5% of the work force is still employed according to the March 2009 numbers.

How does this affect us locally? For simplicity’s sake, let’s take a look at February’s statistics, because we have them for the nation and state. In February 2009, the US unemployment rate (or sometimes called jobless rate) was 8.1%, which means that the 91.9% of the workforce who wanted to be employed had a job. The rate for the same period in Utah was 5.1% (or 94.9% employed). This puts Utah at number six on the list behind Wyoming (3.9%), Nebraska, North Dakota, South Dakota, and Iowa (4.9%) out of the 50 states and Washington D.C. In the Provo-Orem and Salt Lake City Metropolitan Statistical Areas, the rate was 5.2%. This places our local rate at 27 on a list of 372 other Metropolitan Statistical Areas.

We all know we’re in turbulent economic times, but in our neck of the woods we’re not being impacted as heavily as other areas of the country, and we’re not getting through it unscathed, either. Have we seen the worst of it? Probably not. Is the glass half-empty? No. There is still plenty to be thankful for, because it surely could be a lot worse for many more people.

Chances are high that you know someone who has been laid-off or needs a job. Do them a favor by keeping your ears and eyes open for opportunities, and let them know about what you see or hear. History tells us that communities that work together are usually better insulated against downturns as each member helps his or her fellow citizens. The situation will get better. At a recent event I attended, Steve Forbes, the Chairman and CEO of Forbes, Inc., and Editor-in-Chief of Forbes Magazine, said, “The world can only end once–and this is not it.”

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Tax Fun Facts

Is it really fair to place the words “tax” and “fun” next to each other? We’ll let you decide, but with April 15^th bearing down on us, here are some interesting–if not fun–tax facts to divert your thoughts for a few minutes and hopefully lift your spirits.

• The first property tax in the United States was in 1798.
• The first US income tax started during in the Civil War to help raise money back in 1862.
• The first federal tax office in the US was the Office of the Commissioner of Internal Revenue in 1862.
• The 16th Amendment, ratified in 1913, established the first permanent US income tax. Four states rejected the amendment: Connecticut, Florida, Rhode Island, and Utah, and two never considered/discussed it: Pennsylvania, Virginia.
• The Gettysburg address, one of the greatest speeches in U.S. history, has 269 words. The Declaration of Independence contains 1,337 words. The Holy Bible consists of 773,000 words. Yet there are over 7,000,000 (not a typo that is 7 million) words in the U.S. Tax Code (laws and regulations).
• There were 402 tax forms in 1990, by 2002 that number jumped to a staggering 526.
• The number of pages in the tax code and regulations went from 26,300 in 1984 to an astonishing 54,846 in 2003. There are 500 pages in a ream (standard package) of paper–that’s nearly 110 reams of paper! A ream is about two inces thick, so if you stacked all 54,846 pages on top of each other, you would have a stack of paper 220 inches high, or about 18 feet tall!!
• The IRS sends out over 8 billion pages in forms and instructions every single year, that’s nearly 300,000 trees. (Thankfully, they now use recycled paper).
• The easiest form, the 1040EZ, has 33 pages of instructions–ridiculous.

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Minimizing the Stress of a Layoff – Part 1 of 3

Layoffs are commonplace in a sagging economy, and chances are good that you know someone who has recently been laid-off from his or her job. And it often doesn’t matter how good you are at your job or how hard you work. But a layoff doesn’t have to be the end of the world, nor should it be. The key to minimizing the stress and negative fallout is to know how to react if you are laid-off and to prepare now for the possibility of a layoff in the future.

If you’ve been following this blog, you know we recently posted information about Utah County’s unemployment rate. Fortunately, the Provo/Orem Metro Area ranks 27th out of 372 other Metropolitan Areas in the U.S. according to February 2009 numbers–so it could be lots worse. Nevertheless, while 91.5% of the workers in the Provo and Orem areas are still employed, there are an increasing number of good, honest, hard-working people who want to work, but who do not have a job.

If you’ve been laid-off, have hope. You will survive to work another day if you’re determined to work. You may even find a way to embrace the layoff for what it may be–the opportunity to make a career change that you’ve been considering for a while.

We don’t know about you, but we’re tired of hearing about hope and seeing nothing done. It’s time for solutions. We’ll be posting information we think may be useful for anyone currently employed, anticipating a layoff, or who may have already been a casualty of downsizing.

Please leave us comments with ideas or helpful information you have that may help someone facing the stress of a layoff.

Minimizing the Stress of a Layoff – Part 3 of 3

Here are some additional ideas that may be useful to help reduce the stress of a layoff, or to prepare for the possibility of one in the future:

Be Wise with Your Emergency Fund – This assumes you have an emergency fund. If you don’t have one, start one. Cut back on discretionary purchases and put as much of your paycheck into your emergency savings fund as you can. If a layoff has already affected you, cut back or eliminate unnecessary expenditures and be wise with your use of the fund. Our “How much should I have in savings?” post can help you determine the right amount to put away. And the information in our “Automate Your Savings” post can help you save effortlessly. Hopefully, if you do get laid off, you’ll also have a severance package that will help you pay the bills. However, the more you can sock away, the more peace of mind you’ll have if the axe falls.

Communicate with Creditors and Billers – One of the major stresses after a layoff is making ends meet. The more willing you are to communicate openly and honestly with creditors and billers, the greater your chances are that they will work with you to help you meet your obligations. It’s not a guarantee, but you may be surprised by what they are willing to do to help you.

Remember to Look on the Bright Side — At worst, getting laid off is a temporary trial (and you will get through it, I promise). At best, your layoff may be the kick in the pants you need to find a more fulfilling job. It’s surprising how often I hear people speak of being thankful for their layoffs (some of them volunteered or even begged to be let go). Their severance packages gave them the time and opportunity to pursue the careers of their dreams. If you’ve been unhappy in your current career path, this layoff may be your chance to explore your options.

Know What Resources are Available — There are many resources available to help if you have already been let go. The Utah Department of Workforce Services has offices in American Fork, Provo, and Spanish Fork with professionals who can help. The Church of Jesus Christ of Latter-day Saints has Employment Resource Centers available to anyone, regardless of religious affiliation.

Tell Everyone You Know That You’re Looking for a Job – Now is not the time to be the strong, silent type. Ask for leads from family, friends, and neighbors. Sometimes it really is who you know, not what you know that leads to a meaningful job opportunity.

If you have ideas or helpful information that may help someone facing the stress of a layoff please leave us a comment.

“You want to do what?!?”

A recent discussion with my wife about our long-term retirement hopes was very revealing. The discussion went something like this:

Wife: “When you retire I think it would be fun to go to culinary school together and consider opening a restaurant. We have so much fun in the kitchen talking and cooking.”

Me: “Yeah. That would be fun. It would be a lot of work, but it would be fun. But what I would really like to do when I retire is be Donald Duck.”

Wife: “You want to do what?!?”

Me: “I want to be Donald Duck at Disneyland or Disney World. I think it would be fun seeing all those happy kids everyday. Don’t you?”

Wife: “I guess, weirdo. But wouldn’t it be easier and more fun being with me doing something we both enjoy?”

At that point I knew she had issued a checkmate, and I had best think about my plans more as our plans to stay out of trouble. It was also apparent that both ideas carried financial implications we have never discussed. Culinary school and funding a business are not cheap, nor is relocating to Anaheim or Orlando.

Consequently, a study from Fidelity Investments indicates this type of discussion is not entirely unusual. It finds we are not doing a very good job talking about our long-term financial goals with our significant others.

The study reports that only 45% of couples regularly discuss finances. And when it comes to retirement plans, 60% of couples don’t agree when they’ll retire, and 42% are like me and my wife–they don’t agree on what kind of life they’ll lead after they retire.

Does your significant other know your financial goals? Do you know his or hers?

What Really Matters?

When the stresses of life and work bog us down it’s easy to forget the things that really matter or are of the most value to us. Here are three things that I have been reminded of recently that may be of some value to you, too:

Relationships One of my peers recently reminded me that while we’re working hard to handle the pressures of the economy on the bank and the daily duties we face, that we can’t forget we have families and relationships to strengthen. As one blogger effectively said it: “The regular companionship and camaraderie of people you care about and share interests with is continually life-affirming. [Relationships] don’t revolve around the things you have or the activities you can afford – they revolve around people and shared experiences.”

Gratitude I find that the more I’m focused on the things I do have, rather than focusing on that which I do not, that I am more cheerful and giving. I become more positive in my thoughts and speech. I become more content to work harder to reach my goals. I have more purpose in my daily actions and interactions. Cicero said “Gratitude is not only the greatest of virtues, but the parent of all the others.”

Service Helen Keller said, “Happiness cannot come from without. It must come from within. It is not what we see and touch or that which others do for us which makes us happy; it is that which we think and feel and do, first for the other fellow and then for ourselves.” It is in the act of helping others that many receive a great deal of personal joy and satisfaction – something that cannot be replaced by any sort of material item.

What really matters to you? What do you value most?

Summer Travel and Vacation Budgeting

Contributing source: PracticalMoneySkills.com

If your kids are like mine, they have made you keenly aware of the fast-approaching summer break. And with the summer kick-off holiday of Memorial Day just a few days’ away, summer travel and vacation plans are being completed at a feverish pace. So here are some things to keep in mind, lest you overspend and end up with a year’s worth of debt for your freewheeling ways.

Plan Wisely
To help you reduce the financial stress of planning your summer getaway, we’ve found a cool and free web-based “travel calculator,” designed to help you plan your vacation budget and stick to it once you’ve left home. The calculator will help you determine the cost of gas (updated daily based on national averages) for your trip as well as account for all the small things that really do add up, and, if you’re not prepared, sneak up and cause you headaches for the rest of the year.

Take the stress out of your next vacation
Jason Alderman, director of Practical Money Skills for Life, shares insights and links to websites where you can research and save money.

Don’t turn a glorious summer into a winter of discontent
Thinking of spending beyond your means for this year’s vacation? Find out what that will really cost with Practical Money Skills for Life’s Cost of Credit calculator.

Stop identity theft before it happens
Keep your identity safe and your money where it should be– in your account. Be aware of situations that identity thieves love.

Check your credit report when you get home
Even if you think you’ve kept all your information and valuables safe, we recommend checking your credit report for suspicious activity when you return home. Check out or last post, “Tips to Help Build and Maintain Good Credit” for more information.

Eating Healthy Without Breaking the Bank

I recently read an article in a SelectHealth publication about healthy eating that lead off with: “Do you go into sticker-shock when you load your shopping cart with healthy foods? A study in the Journal of the American Dietetic Association found that healthy foods such as lean meats, low-fat dairy products, fruits, and vegetables are significantly more expensive than junk foods.”

Oh. So that explains why I always fill my shopping cart with pre-packaged, pre-prepared foods–it’s cheaper. (Not to mention it usually lasts longer if I don’t eat it right away, and it’s less work.)

But what’s the trade-off?

Studies abound that show there are greater benefits from eating healthy foods like fresh fruits and vegetables than from eating the pre-packaged, pre-prepared foods. And other studies indicate that poor diets cause an increase in illness. And increases in illness usually cause increases in medical expenses. So is a less-than-healthy diet of cheaper, unhealthy foods less costly than increases in medical and prescription expenses? Probably not.

So here are a few tips for buying more healthy foods without busting your budget:

* Buy staples such as brown rice, oatmeal, and beans in bulk when they go on sale.
* Buy produce in season. Not only will it taste better, it’s usually cheaper. A local fruit stand like Verd’s Market on State Street in Orem or Chavez Fruit Stand in Lindon is a great place to look for deals.
* To lengthen the shelf-life of fresh foods like broccoli, cauliflower, carrots, corn, and other veggies you freeze at home, blanch them first. Put them in boiling water for one to three minutes, and then plunge them into ice-cold water. Drain well and then freeze in plastic bags.

For more tips on healthy eating and shopping on a budget, visit http://www.fruitsandveggiesmorematter.org/. For the complete SelectHealth article “Healthy Foods Don’t Have to Break the Bank” visit www.selecthealth.org/totalfitness, and click on the “Total Fitness Spring 2009″ link.

Of course, you can always plant a garden and a few fruit trees and grow your own healthy food, too.

A Fortune of Frugality

In my efforts to be somewhat frugal, I have found a great little Chinese take-out restaurant within walking distance of my office with great food at a great price. In the fortune cookie that came with my meal today I received the following: “You shouldn’t overspend at the moment. Frugality is important.”

Certainly, practicing frugality is an important thing to do more often than “at the moment” when one considers the bigger picture of economic downturns, saving for a home, college, retirement, or building wealth. But, like many things, being frugal is sometimes more easily talked about than practiced.

Even the fact that I found someplace to eat within walking distance in order to save gas is overshadowed by the fact that I am still spending money for a lunch that could be even less if I packed one from home–even though I love Chinese food and the potstickers are the best I’ve ever had. (Fortunately for me, I have a great spouse who effectively, yet subtly, reminded me that I should be more conscious of my spending by making me a lunch earlier this week.)

So here’s the tip this week: Frugality is always a good idea. How to do it is up to you, but here is some helpful strategy advice from Wikipedia regarding “Frugality“: “Common strategies of frugality include the reduction of waste, curbing costly habits, suppressing instant gratification by means of fiscal self-restraint, seeking efficiency, avoiding traps, defying expensive social norms, embracing free (as in gratis) options, using barter, and staying well-informed about local circumstances and both market and product/service realities.”

Savings Rate at 14-Year High (Duh)

The Bureau of Economic Analysis (BEA) announced on June 1, 2009 that April’s U.S. Personal Savings Rate hit 5.7%, the highest level since February of 1995 (5.9%). And although the economic stimulus plan was aimed at increasing spending to support the economy, much of the increase in real disposable incomes went into savings.

Moreover, in their search for financial safety and security over the past year, consumers have actively redistributed their financial resources. Encouraging this trend and seeking to help stabilize the economy, the FDIC has extended its increase in insurance limits to $250,000 to the end of 2013.

This news should come as no surprise to anyone.

Much of the opposition to the economic stimulus plan centered on concerns that the stimulus money would be saved, and therefore not provide the hoped for stimulus. The BEA report illustrates the fulfillment of the basic concepts that people are going to hold on to their money when, 1) money is getting harder to come by, 2) people are afraid to spend in an unstable economy, and 3) the smart spenders know that if they hold out long enough they can get a better deal than if they spend the moment they have a little money.

Note this simple definition from Wikipedia: “Saving is the conservation of money…Saving also includes reducing expenditures, such as recurring costs. In terms of personal finance, saving specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is higher.” It’s not rocket science–in a down economy, people save.

So, at the risk of sounding like a punk kid, I respectfully say to the Bureau of Economic Analysis and all politicians who thought the stimulus should have had a different effect: “Duh!”

Manage Your Accounts Wisely and Guard Against Fees

Many of our nation’s more than 8,000 community banks offer overdraft services to their customers who would otherwise inadvertently overdraw their accounts and thus become subject to fees and complications. In a perfect world, consumers would never find themselves in a situation where they may overdraw their account; however, we know our customers encounter situations in which overdrafts happen.

The following tips can help you manage your account wisely to avoid overdraft situations.

* Keep an eye on your account balance prior to writing a check or using your debit card. Prevention is your best medicine.
o Review your transactions on an ongoing basis.
o Use services, such as online banking, your bank may provide to help you keep up-to-date with your balance.
o Remember to record and deduct checks, automatic recurring payments and debit card transactions and to add any deposits that have not yet been posted to your account.
o Do not use your debit card like you use your credit card. Your debit card is like an electronic check and the funds are automatically deducted from your account.
* Ask your bank about all of its overdraft services. Community banks generally offer three types of overdraft services: overdraft lines of credit, transfers or sweeps from a savings account or another checking account, and overdraft coverage.
o Overdraft lines of credit charge interest but provide a safety net. They may also have a transaction and/or annual fee. If needed, disbursements can be repaid over a period of time.
o Transfer or sweep arrangements allow customers to cover overdrafts using their own funds for a small transaction fee.
o Many times a bank will choose to pay an overdraft for a fee to avoid consumers having the inconvenience of returned transactions – embarrassment, fees and hassles from merchants.
o Talk to your community banker about the best choice(s) for you.

During these challenging economic times, consumers are making tough financial choices–more so than they have ever had to do in the past. We want to be sure that consumers manage their accounts wisely. Most community banks provide some form of overdraft services, and do so in a way that best meets the needs of their customers. Remember that community bankers are there to help you.

Summer Travel and Vacation Budgeting

Contributing source: PracticalMoneySkills.com

If your kids are like mine, they have made you keenly aware of the fast-approaching summer break. And with the summer kick-off holiday of Memorial Day just a few days’ away, summer travel and vacation plans are being completed at a feverish pace. So here are some things to keep in mind, lest you overspend and end up with a year’s worth of debt for your freewheeling ways.

Plan Wisely
To help you reduce the financial stress of planning your summer getaway, we’ve found a cool and free web-based “travel calculator,” designed to help you plan your vacation budget and stick to it once you’ve left home. The calculator will help you determine the cost of gas (updated daily based on national averages) for your trip as well as account for all the small things that really do add up, and, if you’re not prepared, sneak up and cause you headaches for the rest of the year.

Take the stress out of your next vacation
Jason Alderman, director of Practical Money Skills for Life, shares insights and links to websites where you can research and save money.

Don’t turn a glorious summer into a winter of discontent
Thinking of spending beyond your means for this year’s vacation? Find out what that will really cost with Practical Money Skills for Life’s Cost of Credit calculator.

Stop identity theft before it happens
Keep your identity safe and your money where it should be– in your account. Be aware of situations that identity thieves love.

Check your credit report when you get home
Even if you think you’ve kept all your information and valuables safe, we recommend checking your credit report for suspicious activity when you return home. Check out or last post, “Tips to Help Build and Maintain Good Credit” for more information.

How Does the FDIC Affect My Bank’s Service?

This post addresses how the FDIC affects the level of service you receive from your bank. But before we jump into service levels, you need to understand more of what the FDIC does and how it operates.

The FDIC directly examines and supervises more than half of the institutions in the banking system. Banks can be chartered by the states or by the federal government. Banks chartered by states also have the choice of whether to join the Federal Reserve System. The FDIC is the primary federal regulator of banks that are chartered by the states that do not join the Federal Reserve System. For example, Western Community Bank is a state-chartered bank that opted not to join the Federal Reserve System (like most community banks in the country), so the FDIC is Western Community Bank’s primary regulator.

Banks have to comply with a host of federal and state regulations and safe operating guidelines designed to protect depositors and their money. The FDIC regularly sends teams of examiners to banks to review compliance with banking regulations, information security guidelines, and prescribed safe and sound operating procedures. It’s the FDIC’s supervisory role that plays a large part in the service, and services, you receive from your bank.

Checking, savings, loans and other accounts and products are made available in accordance with banking regulation. Computer systems, electronic and paper information, and how that information is used is carefully managed and protected by regulation. The interest rates for savings accounts and loans are also managed, in part, by regulatory requirements for equity and availability. Therefore, the challenge for your bank is to offer all of its services and products in a highly regulated industry, while doing its best to delight you.

Certainly personalities, cultures, and management styles will play a role in the kind of service you receive at your bank. But from an operational and procedural standpoint, the FDIC plays an important role in maintaining the stability of, and public confidence in the nation’s financial system by insuring deposits and examining and supervising financial institutions.

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Buying Stuff…

Sometimes the best way to face reality is with a little humor…

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Tips to Help Build and Maintain Good Credit

Having good credit and using it wisely can make life go easier. Fortunately, there are positive steps you can take that will help make this possible. Here are three important facts to know as you build your good credit:

1. You Can CORRECT Your Credit Report when it is in Error
Your credit report is the summary of your financial reliability–your history of paying debts and other bills. There are three major credit bureaus–Equifax, Experian and TransUnion. Federal law requires these credit bureaus to investigate any complaint you bring to them in writing (usually within 30 days), send you a prompt response and correct any errors. You can learn more about amending and correcting your credit report by visiting the FTC’s website.

2. You Can Take Steps to IMPROVE Your Credit Score
Your credit score is a number lenders use to help evaluate your credit-worthiness. Many lenders use a system called the FICO Score. As a rule, a good score will mean better chances of getting credit at an attractive rate, so taking steps to improve your score can be well worth the effort. Here are some steps to take:

* Pay bills on time.
* Keep credit card balances low.
* Keep debt to less than 30% of your available credit.
* Consider closing unused or forgotten accounts.
* Diversify your credit (e.g., not just many cards, but cards plus installment credit).
* Pay off debt rather than transferring it between cards or accounts.

3. Monitoring Your Credit is FREE
You can get a free copy of your credit report every year from each of the three national credit reporting agencies. That means you can monitor your credit year-round, ordering a report from each of the three once every four months. There is only one online source authorized to give you your report for free: http://www.annualcreditreport.com/. Note: You may be offered additional products or service while on the authorized website, but you are not required to make a purchase to receive your free annual credit report.

A little prevention can go a long way–especially when it comes to your credit and finances. Make it a point to review your finances regularly, and watch for these signs of over-extended credit:

* Paying only the minimum payment month after month
* Being out of cash constantly
* Being late on important payments such as mortgage
* Taking longer and longer to pay off balances
* Borrowing from one lender to pay another

Banks Declare War!??

Today I visited a commonly viewed website to see the headlines for the day. Much to my surprise, one headline read “Banks declare war — on you!” “Really?” I thought. “I must have missed that memo.” Of course, I had to click to read more about this ruthless declaration of tyranny and oppression. It turns out that the sensationalized article was not about ALL banks, as suggested, only about credit card companies and credit card issuing banks.

In fact, I started searching for the word “bank” in the article with these results:

“bank” — did not appear in the body of the article–not even once!
“banks” — another no-show
“banker” — never appears
“bankers” — the term is only used twice
“banking” — one appearance as a description, as in “banking regulators”

What this article was really about was credit card companies and credit card issuers. In the interest of full disclosure, this means large, very large companies with Industrial Loan Companies or very large banks–not ALL banks as suggested, and certainly not smaller, community-based financial institutions which may not even offer credit cards.

The bottom line is this: You should be wary of the blanket use of the term “bank.” Remember that the current economic environment was created by large, even “too-large-to-fail” investment banks and greedy institutions (many of which are not banks) that conducted very little (if any) business directly with American consumers. Also remember that a large part of the reason our markets are still operating–be it with a limp–is because there are hundreds, if not thousands, of smaller community-based banks at the foundation of our nation’s financial system trying desperately to treat people with the dignity, respect, and honesty they deserve. These smaller banks have not, nor ever will “declare war” on their customers, because that’s not the way to treat your friends and neighbors.

I will give the author one shred of credit: she managed to point out that you should always be careful with credit cards and credit card debt, and that you should try to get your balances paid off as soon as possible to avoid being the unsuspecting victim of a potential “war” with your credit card issuer. Even when masked in garbage reporting, that is always sound counsel.

News You Can Take to the Bank

Western Community Bank was recently invited to participate in a roundtable discussion sponsored by the good folks at Bennett Communications and Utah Valley Business Quarterly. Other Utah County institutions including Far West Bank, Bank of American Fork, Zions Bank, AmBank, and Family First Federal Credit Union also participated. The entire discussion can be found in the Summer 2009 Utah Valley BusinessQ magazine. Here are some highlights from comments made by WCB Executive Vice President, Ed Sanches:

Jeanette Bennett, BusinessQ: How would you describe the current banking environment in Utah Valley?

Ed Sanches, Western Community Bank: The challenges we are facing are unprecedented. But this has brought out more commitment from bankers. There is the old joke about “bankers’ hours,” but the lights are on late in managers’ offices. This is directly related to the commitment bankers now have, not only to their clients, but also to the community they are serving. Bankers are pulling together.

Bennett: The perception exists that it is difficult to borrow money right now. Is that true?

Sanches: No bank right now or finance institution want to bring on new loans that are going to be trouble for them. No bank really ever has. What caused the recession wasn’t commercial banks like ours. In reality, it was the mortgage and investment industry that said everyone deserves a home, no money down. Consumers got in their mind that all banks should offer that. Some banks did get sucked into that and now they are feeling the ramifications. For the majority of Utah Valley banks, it is business as usual for qualified borrowers.

Bennett: What are some examples of good news in our community?

Sanches: Short- and long-term rates are at all-time lows. For those who are qualified, short-term rates are very low. Mortgage rates are very low…Banks in Utah County are, for the most part, strong, well-capitalized and actively looking for new clients. It really is refreshing. There are less people coming in to borrow money, but those who are coming in have the capability to repay what they are asking for…We are in business to lend money.

Safe Shopping Tips for the Holiday Season

According to statistics compiled by http://www.identitytheft911.com/, two to four identity theft crimes are reported every hour of the winter holiday shopping season.

“The annual holiday shopping season is a peak time for identity theft, so it’s critical that consumers be on high alert and educate themselves in order to help reduce the risk of becoming victims,” said Adam Levin, chairman, Identity Theft 911, which offers ID theft resolution services.

His company offered these tips for safer holiday shopping:

* When shopping online, look for a small “padlock” icon in the browser, which means the site has been verified to be secure.
* Use credit cards instead of debit cards.
* Keep credit card numbers secret. Don’t store credit card and personal information in any online accounts
* Check bank and credit card statements and accounts every day to make sure each transaction is legitimate. Remember that shopping Web sites have no reason to ask for Social Security numbers or passwords, so never provide them.
* Never send payment information via e-mail.
* Don’t use automated teller machines that are in secluded areas. They are more likely to be equipped with card readers than an ATM in or near a bank.

“Consumer debt is not your friend”

I follow a number of blogs that interest me. One of my favorites is the blog of New York Times best selling author and really nice guy, Seth Godin. A few days ago he wrote a brilliant post on his blog about consumer debt that I wanted to share on Smart Banking Tips. It’s posted here in its entirety with his permission. (And I highly recommend subscribing to his blog and reading his latest book, Linchpin, too):
Consumer debt is not your friend

Here’s a simple MBA lesson: borrow money to buy things that go up in value. Borrow money if it improves your productivity and makes you more money. Leverage multiplies the power of your business because with leverage, every dollar you make in profit is multiplied.

That’s very different from the consumer version of this lesson: borrow money to buy things that go down in value. This is wrongheaded, short-term and irrational.

A few decades ago, mass marketers had a problem: American consumers had bought all they could buy. It was hard to grow because dispensable income was spoken for. The only way to grow was to steal market share, and that’s difficult. Enter consumer debt.

Why fight for a bigger piece of pie when you can make the whole pie bigger, the marketers think. Charge it, they say. Put it on your card. Pay now, why not, it’s like it’s free, because you don’t have to repay it until later. Why buy a Honda for cash when you can buy a Lexus with credit?

One argument is income shifting: you’re going to make a lot of money later, so borrow now so you can have a nicer car, etc. Then, when money is worth less to you, you can pay it back. This idea is actually reasonably new–fifty years or so–and it’s not borne out by what actually happens. Debt creates stress, stress creates behaviors that don’t lead to happiness…

The other argument is that it’s been around so long, it’s like a trusted friend. Debt seems like fun for a long time, until it’s not. And everyone does it. We’ve been sold very hard on acquisition = happiness, and consumer debt is the engine that permits this. Until it doesn’t.

The thing is, debt has become a marketed product in and of itself. It’s not a free service or a convenience, it’s a massive industry. And that industry works with all the other players in the system to grow, because (at least for now) when they grow, other marketers benefit as well. As soon as you get into serious consumer debt, you work for them, not for you.

It’s simple: when the utility of what you want (however you measure it) is less than the cost of the debt, don’t buy it.

Go read Dave Ramsey’s post: The truth about debt.

Dave has spent his career teaching people a lesson that many marketers are afraid of: debt is expensive, it compounds, it punishes you. Stuff now is rarely better than stuff later, because stuff now costs you forever if you go into debt to purchase it. He’s persistent and persuasive.

It takes discipline to forego pleasure now to avoid a lifetime of pain and fees. Many people, especially when confronted with a blizzard of debt marketing, can’t resist.

Automate Your Savings for Maximum Benefit

One of the greatest consumer tools to be adopted by banks in the last decade is online banking. This powerful tool lets you check your account balance, transfer funds, and manage your money from the comfort of your office or home computer. Online banking has also made it easier for people to save money by allowing users to better maintain their accounts and manage the flow of funds in and out of their bank.

This ability to track and transfer funds has also made it remarkably easy to save money. Chances are your bank has a feature in its online banking system to set up scheduled automatic transfers between checking and savings accounts. (If not, we know a great bank that does.) You can easily set-up these automatic transfers to move nearly any amount of money from your checking to your savings-and you won’t ever have to lift a finger after the transfer is set-up.

After time you may find you don’t ever really think about it either. Try it for a month to see how easy it is. Set-up a $5, $10, or $25 (or whatever amount you can afford) automatic transfer from your checking to savings account. Set it to be a weekly, bi-monthly, or monthly transfer. After the month passes, examine your finances. Did you miss the money? Maybe you need to set a lower amount. Perhaps a more aggressive amount is appropriate. Soon you’ll be building up your rainy day or vacation fund without a second thought.

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(Almost) Pain-Free Budgeting

Do you have plenty of cash, know exactly where every penny goes and never have stress paying bills? If so, you may want to skip this post, because you’re either too rich or too smart to need it.

For the rest of us, making–and sticking to–a meaningful budget can be an essential tool for ensuring that our money gets used where it’s needed. Even if you’re in the fortunate situation of having plenty of income, the homework involved in creating a budget can be instructive. You may find that you’re spending more than you wish (or need) on things like groceries, entertainment or eating out.

Taking the time to sit down and draw up a budget used to be pure drudgery enlivened only by the reality of staring your unwise spending habits in the face. In fact, one of the biggest obstacles to creating a meaningful budget is that most of us would rather not know how we really spend our money–because we know that to follow a budget requires sacrifices we may not be willing to make.

But have courage. With the great (and often free) online tools available today, budgeting can be as easy as a few clicks and setting some basic goals. As for the sacrifice part, a realistic budget will help you find the areas in your spending where you can afford (and are willing) to sacrifice more–or less–according to your desired goals.

If you’re not sure where to start, use a free tool like FinanceWorks to help you take a quick snapshot of where you’re income is going. Simply categorizing your expenses is often motivation enough to hunker-down and make a meaningful budget. And you can use the goal setting features of a program like FinanceWorks to take your budget to the next level. These automatic features will help you monitor and adjust your spending, and reach your goals more easily than programs that only allow you to categorize expenses.

Cool Online Tools to Help You Succeed

Many banks are working aggressively to improve their online services to include interactive budgeting and financial management tools to help their customers. Many are doing this in response to other non-bank tools available online. While these non-bank tools are pretty amazing, they lack an important feature: regulatory oversight.

Sites like mint.com and wesabe.com offer a wide range of tools and services that are definitely useful, but they lack the important data and information security requirements your bank strives to adhere to in order to provide you FDIC deposit insurance. These are pretty cool sites, but they could be better with some regulatory oversight and requirements.

Recognizing the opportunity to better serve its customers, Western Community Bank was among the first 20 banks in the country to launch FinanceWorksTM powered by Quicken® in September 2008. FinanceWorks is a FREE online money management tool, protected inside of the bank’s Home Banking system security, which allows users to manage not just their Western Community Bank accounts, but accounts at over 5,000 financial institutions and credit card companies. It’s the best of both worlds-the awesome tools to manage your finances, with the security of a trusted and regulated online banking system. Checkout this cool FinanceWorks tour to see how you can use this simple but powerful tool to help you manage all of your money from one trusted site.

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Managing a Joint Account

Whether you’re married, have a business partner, or operate a non-profit organization, chances are good that you have a joint checking account. Chances are also good that you (or another account signer) have had some heartburn managing the account. In times when every penny counts, here are some tips on how to help you keep your joint account worry-free and out of the red.

Tip #1 – Communicate with the other account signer(s).

This simple tip can be the difference between earning interest and paying non-sufficient funds fees. When account signers keep open lines of communication, each will know when deposits are made or when to anticipate or record withdrawals. It’s a good idea to show each other receipts and talk about balances on at least a daily basis, especially if it’s a very active account.

Tip #2 – Take equal responsibility for the account.

Each signer of the account signature card is equally responsible for the account, no matter the account status. When things are good, this is usually not a problem. But when things go bad, all signers are equally responsible for making it right, regardless of which signer may have caused the problem. If you are constantly fighting over who is responsible for making a deposit or keeping track of this or that, then a joint account might not be right for you. All account signers are equal owners in the eyes of the bank.

Tip #3 – Monitor account activity effectively.

Ever wonder what that thing is that comes with your checks that has the calendar on it? It’s a check register. A register is the traditional way to keep track of account deposit and withdrawal activity. Using it will help you avoid fees and headaches related to bounced checks. Don’t write many checks or occasionally forget to record ATM withdrawals or debit card transactions? Home Banking may be a better solution. Regularly logging-in to Home Banking and checking your account activity and balance is a great way to keep up on your account activity. For really effective account monitoring, check-out our FREE FinanceWorksTM tool. It’s easy to use and can be configured to help you manage accounts at over 5,000 other financial institutions and creditors across the country-not just Western Community Bank accounts.

Tip #4 – Communicate with the bank if you need help.

It may surprise you, but we often help people balance their checkbooks and teach them how to manage their accounts. Other places may charge you for this kind of service, but not Western Community Bank. This is just part of what we do. When you’re struggling to manage your finances, it’s worth your time and effort to contact your bank for assistance. This can help you avoid overdrafts and returned check fees, and demonstrates to your bank that you are tying to manage your account and putting forth the effort to keep your account in good standing.

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Manage Your Accounts Wisely and Guard Against Fees

Many of our nation’s more than 8,000 community banks offer overdraft services to their customers who would otherwise inadvertently overdraw their accounts and thus become subject to fees and complications. In a perfect world, consumers would never find themselves in a situation where they may overdraw their account; however, we know our customers encounter situations in which overdrafts happen.

The following tips can help you manage your account wisely to avoid overdraft situations.

* Keep an eye on your account balance prior to writing a check or using your debit card. Prevention is your best medicine.
o Review your transactions on an ongoing basis.
o Use services, such as online banking, your bank may provide to help you keep up-to-date with your balance.
o Remember to record and deduct checks, automatic recurring payments and debit card transactions and to add any deposits that have not yet been posted to your account.
o Do not use your debit card like you use your credit card. Your debit card is like an electronic check and the funds are automatically deducted from your account.
* Ask your bank about all of its overdraft services. Community banks generally offer three types of overdraft services: overdraft lines of credit, transfers or sweeps from a savings account or another checking account, and overdraft coverage.
o Overdraft lines of credit charge interest but provide a safety net. They may also have a transaction and/or annual fee. If needed, disbursements can be repaid over a period of time.
o Transfer or sweep arrangements allow customers to cover overdrafts using their own funds for a small transaction fee.
o Many times a bank will choose to pay an overdraft for a fee to avoid consumers having the inconvenience of returned transactions – embarrassment, fees and hassles from merchants.
o Talk to your community banker about the best choice(s) for you.

During these challenging economic times, consumers are making tough financial choices–more so than they have ever had to do in the past. We want to be sure that consumers manage their accounts wisely. Most community banks provide some form of overdraft services, and do so in a way that best meets the needs of their customers. Remember that community bankers are there to help you.

Tips for Small Business: Surviving Today’s Financial Crisis

I’ve been looking for some good info for small business owners and stumbled upon this article. It’s longer than I would normally include on the Smart Banking Tips blog, but it’s a pretty quick read with some excellent advice from Robert C. Seiwert, Sr. Vice President and Director, ABA Center for Commercial Lending & Business Banking.

1) Check your FDIC insurance coverage limits.

a) Understand what the FDIC insures … and what it does not.
The FDIC insures all deposits at insured banks, including checking, NOW and savings accounts, money market deposit accounts, and certificates of deposit (CDs) up to the FDIC’s insurance limit. The FDIC does not insure stocks, bonds, mutual fund shares, life insurance policies, annuities, or municipal securities, even if the small business purchased these products from an insured bank.*

b) Use the FDIC’s Electronic Deposit Insurance Estimator (EDIE) to calculate the exact amount of insurance coverage that your small business has at each insured bank. EDIE is located on the FDIC’s Web site at www.fdic.gov/edie/.

c) Understand how the FDIC defines account ownership categories to maximize insurance coverage.
The FDIC considers “single accounts” of sole proprietorships as personal accounts (not as business accounts) when calculating insurance coverage. Single accounts are deposits owned by one person. If more than one person is a signatory to an account and they have equal authority to withdraw funds, the FDIC may include these funds in the “joint category” thus allowing the sole proprietorship additional FDIC insurance.*

d) Remember: the increases in deposit insurance will expire.
Increases in deposit insurance coverage for non-transaction accounts expire on December 31, 2013 and for transaction accounts on June 30, 2010. Depositors should continue to monitor not only deposit insurance limits, but also what is and is not covered by the FDIC.

e) Ask your bank if it provides extra insurance coverage through CDARS.
If a small business has deposits at a bank that exceed the FDIC’s insured coverage limit, CDARS (Certificate of Deposit Account Registry Service) can provide protection. It enables banks to offer up to $50 million in federal deposit insurance by spreading the deposits among several banks (thus spreading the risk) and allowing customers to keep all of their deposits in one bank. More than 2,000 banks offer this service. Also, consider splitting deposits among additional FDIC-insured banks.

f) Make sure “sweep accounts” are “swept” into FDIC-insured accounts.
“Sweep accounts,” set up to earn interest on small business deposit accounts, should be swept into FDIC-insured accounts. If your bank doesn’t offer a sweep option, make sure it collateralizes the swept deposits with U.S. government securities.

g) What if your bank merges with another bank?
If two insured banks merge, the FDIC provides separate insurance coverage for deposits at both institutions for a limited time. This grace period allows small business owners time to restructure their accounts to maintain full FDIC insurance coverage on all their deposits. The length of the grace period varies by the type of deposit account.*

2) Review the viability of your business plan.

a) Make sure your business plan has three scenarios: best case, most likely, and worst case. Be prepared to execute each one.
b) Review your business plan with trusted financial advisors including your banker, your accountant and your lawyer. Ask for their input and revise the plan as appropriate.
c) If your plan calls for expanding your business, reassess the business/market needs for this expansion. Previous assessments may not be valid given today’s economic uncertainty.

3) Keep your banker in the loop.

a) Provide updates on how your business is weathering today’s economic storm.
b) Make sure you share all of the news–the good, the bad and the ugly. Bankers do not like surprises.
c) Ask for feedback on your revised business plan scenarios.

4) Conserve cash.

a) Withdraw cash from your business only when absolutely necessary. Think twice about taking money out of your business to support a lavish lifestyle. Bankers are unlikely to replace these funds (via a loan).
b) Review how your business collects, disburses, and invests cash. Ask your banker to review your cash management systems to boost available cash flow. Your goal should be to accelerate your receivables, maximize your investment income and pay bills on time.

5) Keep your suppliers informed of your financial situation.

Trade credit is an important source of funds for most businesses. It is important to maintain good relations with suppliers since they provide you with the products and services you need to run your business as well as the credit to finance them. If you think your business might experience a cash flow problem, ask suppliers if they would consider extending their trade credit terms to you. Every dollar of trade credit extended is one less dollar that you will need to ask your banker for.

*Source: FDIC

Robert C. Seiwert is a Senior Vice President of the American Bankers Association. Prior to joining the ABA, Mr. Seiwert was a banker for over 30 years, serving as President and CEO of a high-performing community bank and Director of Commercial Marketing for one of the nation’s largest financial institutions.

Banking is Changing (part 1 of a 2-part series)

Amidst the news of economic stimulus, bank failures, and tightening credit markets, it should be obvious that the banking industry has an unprecedented opportunity to make some changes. Banks that embrace the opportunity will be successful. Those that don’t may find a long and jagged road to recovery (or failure).

I’m a firm believer that challenges are opportunities dressed in work clothes. By deduction, this means that we have a surplus of opportunity in our current economic environment. But before we can regroup and march forward we have to assess the past.

Here is some of what we learned in 2009:

* Washington and Wall Street are more out of touch with Main Street than ever. There are over 8,000 community banks in the U.S that understand the needs of the local economies, communities, and individuals they serve. These generally operate in an honest, ethical, and sound manner. Very few of these smaller banks receive any of the luxuries afforded the much larger institutions, yet are being examined as though they are the cause of the problem. And even with bail-out money and more public scrutiny, the banking behemoths receiving the greatest consideration have yet to demonstrate any meaningful remorse or corrective action.
* “Too-big-to-fail” is a misnomer. The megabanks that received the biggest bailouts failed by most people’s definitions. Too-big-to-fail in this case really means too-deep-into-the-politicians-pockets-to-have-to-suffer-the-consequences-of-poor-decisions-and-mismanagement-in-a-free-market-system.
* Technology matters, but doesn’t replace customer service. Enhancements in processing services, online tools, and mobile banking are important–so long as they ultimately provide the customer with a better experience, or allow bank staff to better serve their clientele in meaningful ways. But these services, no matter how good, don’t take the place of exceptional and personal customer service.
* Lending standards were too liberal. Lending standards that required no verification of income and provided consumers the opportunity to borrow beyond their means to repay were not only dangerous and irresponsible; they were an effective way to hurt banks and consumers that were trying to do things the right way with integrity and ethics.

Certainly this is a shortened (and probably oversimplified) list, but the ideas here will have an interesting ripple effect into 2010. I anticipate this year will demonstrate that…

* Tightened lending standards will remain, but will be different in good ways.
* Customer service matters, but doesn’t replace technology.
* New regulations will require more accountability from everyone.
* Banking really is no longer a service, but a commodity that is driven and enhanced by customer service (like just about everything else).

More on these ideas in the next post…

Banking is Changing (part 2 of a 2-part series)

In part one of this series I said that I’m a firm believer that challenges are opportunities dressed in work clothes, and that by deduction we can quickly see that there is a surplus of opportunity in our current economic environment.

Here’s where I see some of the greatest opportunities for individuals, families, and businesses:

* Improved lending standards. Though they will remain tighter than what we’ve seen in the last few years, lending standards will be different in good ways. It seems that everyone is internalizing the benefits of the sound, fair, and more responsible versions of standards from the last 15 years. These fresh standards will be better because the economy is forcing all of us to be more responsible and accountable. Sound standards are good for the economy and everyone participating.
* Customer service matters, but doesn’t replace technology. This one is a paradox. I argued in part one that technology matters but doesn’t replace customer service. In fact, both are true. In 2010 we’ll see an increase in the adoption of technologies designed specifically to assist the customer–technologies that do what people can’t. So while it’s critically important for banks to give you the attention you deserve, when your bank chooses to become IT savvy and makes sound business IT investment decisions, they’re going a long way to invest in your financial success and future needs.
* New regulations will require more accountability from everyone. The Federal Reserve has stated: “Our goal is to ensure that consumers receive the information they need“. Combined with other things I have read in trade publications, regulators are working to require the banking industry and the consumers who use the products to be more responsible for their actions. Or in the words of economist Merton Finkler, “In a highly leveraged economy, fiscal and monetary policies are not enough. We have to make changes in lending behavior. Excessive debt accumulation, whether it be by the government, banks, corporations or consumers, poses greater systemic risks.” In our ever-shrinking world, the actions of individuals matter more than ever.
* Banking really is no longer a service, but a commodity (like just about everything else). From Wikipedia: “A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. the same no matter who produces it…Commoditization occurs as a goods or services market loses differentiation across its supply base…As such, goods that formerly carried premium margins for market participants have become commodities…” It hurts me to say this, but that’s a pretty good definition of banking, no matter where you choose to put your money. The winners in 2010 and beyond (and the banks you should be looking to do business with) will no longer be determined by their products or services, but rather by how well they deliver on their promises and by their willingness to give back to the people and communities they serve. This is especially true for the smaller “Main Street” banks that are more in touch with the local economies and communites they serve.

What are your thoughts? What changes do you want to see? What would you adjust?

The Myth of the Deaf Banker

Perhaps it’s a product of the tremendous amount of noise and chaos in the market today. Perhaps it’s because of the “stuffy” and “fat” stereotype assigned to bankers and bank executives. But I think it’s most likely attributable to the current economic turbulence and the sickening reports of bailouts and bonus pay for the “Big City Bankers” and the giant Wall Street firms. Whatever the cause, I’m here to tell you that not all bankers are deaf.

There’s a lot of discussion about change in the banking industry right now. Business plans have been turned on their ears. Once solid and seemingly safe ways to make loans are now being questioned. It’s getting more difficult for financial institutions to provide distinguishing products and services. It’s even getting hard to tell what a bank is or is not anymore.

What an incredible opportunity this presents for all of us! This shifting is creating an environment where it has never been a better time for consumers to make their voices heard, and for bankers (at least the smart and successful ones) to be taking the time to seriously consider every customer comment, complaint, note of praise, or suggestion.

I’m going to let you in on a little secret…this is not a totally new concept to community-based financial institutions. I’m not talking about the big guys claiming to be community banks, I’m talking about the true community-centered banks that take the time to look a customer in the eye, who may have had to eat some crow now and then, and who have tried to adjust to their customers’ needs and wants in order to stay alive in a highly-regulated and viciously-competitive marketplace. For these smaller institutions, listening and adapting to your needs is something they try very hard to do.

Now, in the interest of full disclosure, not every small bank or credit union fits this description, but generally they try. They at least try harder and are more capable of faster change than the giant institutions that care more about making money off of your money than they do about earning your trust, providing you honest services at a reasonable rate, and investing in your future as a partner–whether you have $5 or $5,000,000.

So here’s a chance for you to make your voice heard. Whether you’re a customer of Western Community Bank or not, comment on this post. If you’re reading this on our blog, comment below. If you’re an email subscriber, visit http://smartbankingtips.com/ and leave us your thoughts. Help us transform banking to be better for you. Help us strengthen our communities. Help us better understand your needs so we can better serve you.

Our ears are open. We’re a little nervous. But we want to hear from you. The platform is now yours…

Is Banking Just a Chore?

Today I learned there are studies that show people view banking as a chore. The remarkable thing about this statement is not that people view banking as a chore, but that studies are actually being conducted to point out the rather obvious. I didn’t need to read this to know it—I work at a bank, after all, and you can tell by the looks on the faces and harried behaviors of many that “going to the bank” is something that has to be done.

As a bank customer, I’m aware of the feeling that it’s a chore because going to the bank is usually an item on a to-do list. (Personal side note: my wife is constantly amazed that I don’t carry any cash, even though most of my waking hours are spent in a bank. So when we need cash, visiting the bank on the weekend or taking a trip to the ATM becomes a to-do item.)

But there’s more to the studies. Several indicate that consumers actually consider banking in the same light as going to the dentist! That’s remarkable. Do you share this opinion? Why or why not? Is going to the bank like getting a routine cleaning, more like a root canal, or like something more enjoyable?

As one with marketing responsibilities for the bank and concerned about improving the experience for every customer, I’m curious to know why this perception exists, and what can be done to improve if not abolish it. Consequently, I’ve been doing a lot of reading lately. In fact, in the last three months I’ve read almost as many books and articles and papers as I did during my last year of college.

Most of the reading I’ve done is business related—marketing, branding, leadership, efficiency enhancement, and the like. And one common theme is emerging: the ability to actively engage customers, staff, management, peers, and prospective clients in meaningful positive ways is a key driver (if not the key driver) to improving the customer experience, the performance of staff members, and peer perception.

So I pose these questions (very transparently seeking to engage those willing or wanting to voice an opinion or participate in the conversation): In what way do you want your bank to actively engage with you? What kind of interaction do you value? What are your expectations? Is banking really just a chore?

Banks That Put You First

Think about the last time you were at the bank. Which of the following two scenarios sounds most familiar?

Teller: Hello, how can I help you?

Customer: I need to make a withdrawal from my savings account.

Teller: What is your account number?

Customer: Hmm, you know, I don’t use this account much; I’m not sure.

Teller: Hold on.

And the transaction continues until you finally get your cash and leave the bank, without an ounce of personal banking or real customer service.

On the other hand…

Teller: Hi Kate, how are you today?

Customer: I’m fine; thanks.

Teller: Hey, how was your recent trip to St. George?

Customer: Oh, it was great. We enjoyed the wonderful weather and saw a few new sites down there and just had a great time together.

Teller: That’s great; are the kids still doing well?

Customer: Yes, they are. Ben is getting ready for baseball tryouts, Kimberly has a piano recital tomorrow night, and Joey just loves preschool.

The discussion and ensuing transaction continue, and Kate leaves feeling important, remembered, and looks forward to the next visit.

The latter scenario does exist at banks, even in today’s seemingly customer-service-challenged environment. And, not surprisingly, it is most often found in safe, reliable community banks like Western Community Bank.

In fact, last August, Kiplinger’s Personal Finance magazine highlighted community banks in the article, “Banks That Put You First”. The report notes that for one customer, “The icing on the cake was the personal service: The bank’s account executives took the time to answer all of his questions. And they helped him refinance his mortgage…”

The article also cites that “Community banks appeal to customers…because they have close ties to local residents and tend to offer more personal assistance than the big money-center banks. ‘Community banks are in the relationship-building business,’ says Karen Tyson, senior vice-president of the Independent Community Bankers of America. They tend to have fewer—and lower—fees than major banks. And they generally offer lower rates on loans and higher yields on savings.”

There are many options to bank with great a community bank in Utah Valley. A number of these banks are within a short drive, and some are so good at delivering customer service that it’s worth taking a littler longer drive.

So if you’re tired of being treated like “just another customer” instead of a person, or you want the peace of mind that comes from keeping your money working for the local economy, visit a local community bank like Western Community Bank. Chances are you’ll feel the difference the moment you walk in the door.

Online Banking Options Video

Online Banking Options Video