In the personal finance blogger world, one way to make money is to accept payment to write a “sponsored post.” You give some blah generic advice about why saving is important and then you drop in a line with “and have you ever heard of this fantastic high yielding account with XYZ? Sign up today!” This is the opposite of a sponsored post in that Wells Fargo might have been willing to pay my money NOT TO WRITE IT. I stopped using Wells Fargo five years ago, and it’s looking like it was a great decision after their massive scandal is shaking wall street to the core.
How Did I Sign Up For Wells Fargo in the First Place?
Whoever made decisions at the University of Florida around 2008 made a deal with Wachovia Bank to allow them exclusive rights to the space in the student union on campus. Unfortunately, this bank was poorly managed and collapsed during the financial crisis, leading to a takeover by Wells Fargo Bank. This institution previously did not have a huge east coast presence, but with the purchase of Wachovia, they gained access to wide swaths of America.
As a freshman in the fall of 2008, I had no clue about how to manage my personal finances. I had always stashed away any birthday or Christmas money that I was supposed to spend on presents in my bank, but I was just naturally frugal and not financially sophisticated. Reps from Wachovia pitched their bank as the easiest choice for incoming students at orientation, so I signed up for an account there like all my friends did.
What did Wells Fargo Give Me?
Once the financial crisis began to unfold, everyone was terrified. My economics professor gave talks that were attended by as many as 1,000 people. It felt safe to have my money at a large bank instead of a small one.
I applied for a credit card and Wells Fargo gave me one with a small credit limit. There were 0 rewards, no cash back anything, and I made my payments in full every month. They had access to ATMs all over the campus, which was their primary selling point. Convenience is the mother of all poor financial decisions.
When I Started To Become Uncomfortable with Wells Fargo
One day when I visited the bank on campus, they tried to talk me into signing up for a new checking account. They said if I spent a certain amount of money in small transactions each month, then they would give me a great interest rate on my savings.
I thought why not? So I signed up, but then noticed something. The whole thing was a massive gimmick. The interest rewards were limited, and I had more accounts to keep up with. I found myself going out of my way to find the Wells Fargo ATM and faced a steep fee if I needed to get cash at an ATM out of network. I reviewed their foreign currency withdrawal policies when I began traveling overseas for study abroad trips, and I noticed that I’d be screwed every time I took money out.
Then I watched my brother get crushed with fees. Somehow rather than refuse withdrawals on his account, they let him keep pulling money until he had a negative checking balance. To rectify this, I think he paid something like $100 in fees on an account that had less than $500 on it.
I Stopped Using Wells Fargo When I Realized There Are Far Better Alternatives
One of my buddies, I believe it was a guy I worked with in the economics research department when I was a teaching assistant, told me about the Schwab Investor Checking account. Schwab checking offered no ATM fees anywhere in the world. I would also have no more foreign currency transactions fees.
I went ahead and signed up to see if it was too good to be true. The account worked. They reimbursed me for all my ATM fees even if it was for $20. When I traveled overseas, not only did they not charge me a conversion fee when I withdrew South African rand, or Mexican pesos, or Euros, they didn’t charge me for using the ATM either.
The yield on the checking account wasn’t great at 0.25% a year, but guess what Wells Fargo paid me at the time? Only 0.01%. One time I saw Wells charge about $25 for a bad check fee my brother deposited. They did this even though it was the other guy’s fault for not having enough money in his account. This happened to me as well, with the same person. Schwab only charged me $5 for the same issue. I immediately realized that Wells Fargo exists as a massive tax of convenience off of unwitting customers afraid to change their accounts due to inertia.
I Stopped Using Wells Fargo When I Saw How They Handled My Grandmother’s Account
When I went home for the holidays and handled banking business, I always noticed that my grandma’s Wells Fargo account seemed to cause trouble for her. Whether it was their refusal to recognize power of attorney documents, charging her excess fees, or giving her middling rates of interest, I was frankly very unimpressed. Even Bank of America, which I also hold in contempt, gave better customer service.
One time when I was in the branch with her, I heard the afternoon readout to the regional office by the branch manager. They stressed all of the activity in regards to new account types, curiously the exact problem that’s damaging the bank right now.
What is the Wells Fargo Scandal?
Today, the reason I stopped using Wells Fargo five years ago is proven correct. They are in trouble today because of their greed for more and more fees. They opened thousands of unauthorized bank and credit card accounts to make more money without telling their customers.
Apparently obscenely high overdraft penalties and criminally low interest rates on savings accounts aren’t profitable enough. They committed fraud, and their CEO just lost $41 million in pay because of his failure. Wells Fargo fired thousands of people. The Consumer Financial Protection Bureau also fined them close to $200 million. To top it off, Elizabeth Warren got to insult them with everything but four letter words in the Senate.
Why this Scandal Should Wake You Up if You Use a Big Bank for your Savings
I’m picking on Wells Fargo hard in this article, but there is a broader lesson here. Many massive brick and mortar banks are giant vampire squids and exist to suck every dollar out of their customers.
Others, like Capital One and Schwab, are more internet-centric and offer far better deals for savings while still offering the resources available to an international bank. If you’re going to have a big gigantic financial institution in your life, I’d much rather it be one of those two companies, and they aren’t even paying me to say that. I’ve used Schwab for everything since I stopped using Wells Fargo five years ago.
Another fantastic destination for your savings is your local credit union. These not for profit institutions exist to serve members. Customers of credit unions also own them. They will have their fees and charges, but they will pale in comparison to the huge profits sought by big national banks at your expense.
If you have your primary banking business at Wells Fargo, Bank of America, Chase, or another huge financial institution, expect them to take advantage of you. Some of these banks, particularly Chase, have fantastic rewards credit card offer that you should take advantage of. They might even have a gimmicky checking account that could be OK to use temporarily.
However, for a primary financial relationship, I would not trust any of them. Don’t set yourselves up for the next Wells Fargo scandal. Switch to another financial institution where the bureaucracy doesn’t demand every dollar it can possibly earn from customers.
Questions for You
- Do you use a big bank for your savings account? Why do you use it? Maybe there’s an argument for one that I’m missing.
- What has been your worst banking experience and why was it so bad?