Do you think we have too many banks in the United States? There were 8,451 FDIC-insured banks as of June 30, 2008. Canada, on the other hand, with 1/10th of the population as the U.S., only has 81 banks, which can be listed on one page. On a per capita basis, we have 10 times as many banks as in Canada.
Of course the benefit of having this many banks is competition, which is usually good for the consumers. When I was in Canada a few years ago, I was astonished how hard it was to find a basic free checking account (or chequing account as they spell it).
I just looked on a few Canadian bank web sites. It’s still the same today. Even the most basic account has a monthly fee. You need to maintain a $1,000 minimum balance to waive the monthly fee. Then they also charge you for each transaction after you use up your allowance of 10 or 15 free transactions per month. That kind of metered checking account is almost unheard of in the U.S.
Intense competition also can go the wrong way, as we know by now how banks were stepping over each other offering mortgages to subprime borrowers. They can’t charge you monthly fee, so they gouge you on foreign ATM and overdraft fees. I think we have too many banks in the U.S.
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That’s a crapton of banks!
I’m interested in seeing some sort of chart laying out what percentage of individuals in the USA bank where. Why do people choose smaller no-name banks/credit unions? Why don’t big banks like BoA, Wells Fargo, WaMu, and etc offer better rates? I’m sure they know what kind of services people want. Fees suck.
I just started digging around the Boglehead forums for more info on mySmart Cash accounts at Fidelity. From the posts in January-March, reviews seem mixed. How do you like them now? I thought about just closing my WaMu online savings and free checking for a Fidelity money market fund and a mSC account.
Harry Sit says
simplesimon – I have been using Fidelity mySmart Cash account for over a year. I’m still very happy with it. I never have to worry about ATM fee or overdraft fee.
I can’t agree more. And it seems we are in for more, much more, thanks to TARP. Basically, any troubled entity wants to convert to a bank to qualify for TARP. We had MS and GS become a bank holding company. Hartford Insurance is considering to become S&L and even cities.(http://calculatedrisk.blogspot.com/2008/11/hartford-hopes-to-become-s-access-tarp.html)
So what’s next? Where does it end?
Note that the US also has a disproportionate number of banks that are “too big to fail” and we have so many little guys eager to get in the game. That tells you something is/was wrong right there.
Actually, we spell them “chequing” accounts. “Checquing” looks too darn hard to pronounce. 😉
I still get gouged on ATM and overdraft fees, though. Maybe I need to start looking into some of CIBC’s competitors.
Harry Sit says
Meg – Sorry about that. Corrected the spelling.
Robert Rice says
Does the U.S. have more banks than Japan?
Do we have so many banks because of the Glass -Steagall Act?
No idea about Japan, nor Glass-Steagall.