How to Pick a Bank

I bank with Bank of America. I despise Bank of America.

Why do I put up with Bank of America when I despise them so much? I suppose it comes down to cost savings and efficiency. BOA has some perks that I use such as free QuickBooks Payroll. In fact, if you keep $100,000 with them, there is quite a nice little package of benefits you get. They have good tools, too, such as their app. In fact, their tools are so good that I never have to go into a branch. That is a big deal for me.

I despise them primarily because their customer service is abysmal. They are almost unapologetically ignorant about their own products; and they consider their one-sided terms and conditions to be basically a Bible. If you ever make a mistake at BOA (or even if they make a mistake), you can almost forget about getting them to waive a fee or working to make you happy. Whether you have a million dollars there or an empty bank account, they just don’t seem to care.

I also despise them because of fees even though I don’t pay them any fees. That brings me to the point of my post. You can only really afford to bank with banks like BOA if you don’t need them. If you need them, they will take you to the cleaners with fees and other things they have buried in their fine print. I avoid the fees only because I am financially healthy.

Your goal in business needs to be to get to the point where you don’t need banks for anything except protecting and managing your money. In other words, you need healthy cash. If you have cash, you are in control; but if you are starved for cash, your bank can easily become your enemy.

Ten years ago, our business was starved for cash and I was fortunate to have a great relationship with a small bank in the area. Small banks really are different from big banks. Small banks bend the rules. They know you. They may come visit you even. When you owe them money, they tend to think in terms of win-win situations because they know that you going bankrupt hurts them, too. I can think of several times where my bank should probably have pulled the plug but graciously stuck with us. I am forever grateful.

I still give that bank business in the terms of a few real estate loans; but a few years ago, I moved to Bank of America for my normal business and personal banking. Their tools and perks enticed me; but the biggest reason I moved was that I knew that I no longer needed the safety of that small bank. My debt was pretty much gone and I had learned some lessons about avoiding traps going forward.

For the most part, my BOA experience has been good. As long as I don’t have problems, it is great. I am saving a lot of money and the convenience is nice. When a problem occurs, that is another matter; I usually want to shoot myself after dealing with them. However, the saving factor is that I know that I am not stuck with them. I have options and If they screw up too bad, I will dump them in a hurry.

If you are not in a good cash position, I really do recommend small banks. If you end up with lots of debt with a bank and no way to pay it off, you are going to end up trapped with them. Trust me when I say it is better to be trapped with a small bank than Bank of America.

By the way, I am not saying you should not have any debt at all in your business. The debt level that I personally accept is around 20-25% of my inventory. That is a big number in itself but is still very conservative. The key is that your debt needs to be low enough to keep you from getting trapped and squeezed by your banking “partner.”

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