PerkStreet Financial

It used to be that people chose banks based on location.  But today, with the profusion of ATMs, online banking and online bill payment, being able to go into a branch just isn’t as important.  Many people consider it a hassle to travel to a branch just to wait in line.

Ron Lieber had a great article in the New York Times today about when it makes sense to switch banks and why bank branches are essentially irrelevant today.  They only thing branches really offer is peace of mind, but it comes at a high price.   Banks spend tons on branches, but   if your bank fails, you’re not going to run over to the nearest branch to get your money.  The FDIC will be sending you a check.

So, if you want to pay for the “peace of mind” that comes from walking by a branch every day, that’s your choice.  After all, not everyone is comfortable banking online.  But when you choose to stick with a branch bank, what are you giving up?  How much are banks spending on a branch that they could be spending on you instead?

Banks literally spend tons of money on branches.  No, that’s not hyperbole.  It costs between $1.5 and $2.5 million to build a branch in addition to paying about $850,000 to staff and maintain each branch every year.  That adds up to $85 billion annually.  Given how much paper currency weighs, that translates into 186,000 pounds of $1,000 bills or roughly 92 tons.  That’s literally tons of money.

But while that’s interesting, the more important question is how else those banks could be spending that money.  For instance, if they didn’t have to spend all that money on a branch, they might be able to afford to offer their checking account customers a rewards program that’s actually rewarding.  That’s just one example of how the money could be better spent.  What do you think?  What would you want your bank to do with that money instead of wasting it on branches?

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