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PF: How much have I lost by using a large bank for the last 10 years?

0.01% deposit rate, inflation, fees, and relatively high mortgage rates have done more damage than you realize

Ignorance can be bliss.


You probably know that using a large bank isn't a good idea.


JP Chase, Wells Fargo, Bank of America, Citibank, Truist (formerly BB&T + Suntrust), and PNC are best known for large logos on skyscrapers and repeated scandals all relating to them stealing your money (fake accounts, hidden fees, etc.).


But you've coasted by because it's actually relatively hard to figure out just how bad the abuse has been.


So let's give it a go.


Let's assume that you have a $20,000 emergency fund worth of savings at one of the large banks listed above.


Let's assume that they have paid you 0% interest for the last 10 years on these savings.


To establish a crude baseline, the current rate offered by Wells Fargo on a 30-year fixed mortgage is 2.75% vs. the current rate offered by Better.com of 2.50% (I'm in no way recommending you use Better - it's just an easy comparable mortgage broker).


So that's a 0.25% differential on loan rates between your large bank and an online lender.


Tthe average annual inflation rate from 2010 to 2020 was 1.71% (source).


And lastly, "Americans pay $329 annually in bank fees on average." reported via a study by Chime.com (again, not endorsing but that's what they found via a 5,000 sample size).


Let's do the math.


Based on your deposit rate and inflation, your $20,000 of savings in January 2010 is worth $16,523 in January of 2021.


So you've paid an inflation penalty of ($3,476).


Based on a home purchase of $200,000 with 20% down + an interest rate difference of 0.25% between your large bank and a more competitive bank, you will pay ($2,520) more of the course of 10 years.


Based on an annual bank fee average of $329, you will have paid $3,290 in banks fees over the 10-years (overdraft, admin fees, ATM fees, etc.).


Adding these 3 areas up:


Over the prior 10 years, you have directly/indirectly paid large banks $9,286 MORE for the privilege of banking with them instead more competitive options.


Would you cut that check from day 1?


Is the $10,000 in costs worth the privilege?

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