Financial institutions taking over one another has been in the news a lot lately. There was Bank of America assuming ownership of Merrill Lynch, JP Morgan Chase taking over Bear Stearns and also Chase’s acquisition of WaMu (Washington Mutual). None of this meant much to me until other banking news hit home, when Citigroup took over Wachovia earlier this week. You see, I’m a Wachovia customer. And though I was that bank’s customer back when it was First Union, the Citigroup-Wachovia business made me a bit nervous.

I’ve got a lot of my financial business tied up in Wachovia, so I imagine that I’m starting to have the same bunch of questions that lots of other Wachovia–and WaMu before them–customers have had. To help give all of us some peace of mind, I spoke (via email) with a financial expert about this, and here’s some advice based on that conversation.

* Don’t think that a merger means you’re out of bank.

“Banks are pretty good at providing a smooth transition for customers when one bank overtakes another,” says Greg Karp, author of Living Rich by Spending Smart. “Banks are likely to make the migration of credit cards, online bill paying and more to the new bank fairly painless.” I can vouch for this, from when Wachovia took over First Union. The only thing that really changed for us was the color and the logo on our checks. Even with this week’s takeover, so far, it’s still business as usual on the Wachovia website.

* Don’t worry so much about your deposits.

You’ve probably all heard the term “FDIC-insured” but may not have known exactly what that means. Well, FDIC stands for Federal Deposit Insurance Corporation, a government agency that insures bank deposits for up to $100,000. That usually covers most commercial bank accounts (i.e. checking and savings accounts). What you may not realize is that FDIC insurance coverage includes $100,000 per person per bank. “Joint accounts–held by a husband and wife, for example–are insured up to $200,000 per bank ($100k per person). Each person is assumed to own an equal share of the account,” says Karp. “Retirement accounts held at banks are generally insured for up to $250,000.” ***UPDATE****These limits may be changing today, October 1, depending on what Congress does with the $700 billion bailout plan. Stay tuned….

* Do be prepared for possible bad news on a home equity loan or line of credit.

As luck would have it, my husband and I had just secured a home equity line of credit through Wachovia for a home renovation we’re planning. We haven’t tapped into it yet, though. With news of Wachovia’s takeover, we’re considering writing ourselves a check for the home equity amount, then putting the amount in a CD for safekeeping. Knowing that FDIC doesn’t protect home equity loans or lines of credit, it might not be such a bad idea.

“In most cases the bank–whether it’s taken over or not–can lower your credit-line limit or cancel it, which has been happening during this credit crunch, as lending standards tighten,” says Karp. Should this happen in our situation, the FDIC says that the lending institution must notify us in writing by three business days after the bank has decided to freeze, lower or cancel a line of credit, and give instructions on how to appeal that decision. Truthfully, I can’t imagine a mammoth bank like CitiGroup really caring if a small-potatoes Wachovia customer like us lost a line of credit because of the takeover.

* Do consider this a time to investigate a new bank.

“I know of no advantage to consumers to use any mega-bank,” says Karp, who recommends mega-bank-merger customers like me look to other kinds of banking institutions during this transitional period. “This might be a great time to dump your giant mega-bank, which are almost universally a lousy choice for consumer banking anyway. Look into a credit union or use the site findabetterbank.com” to see what your other, local options are.

I took Karp’s advice and tried this website out. After answering a bunch of different questions, based on my preferences as a banking customers, the only options it gave me were the big-name banks in my area–none of which are walkable to my home and none that are locally run or owned. Karp recently wrote a column for the Chicago Tribune pointing out that online banks are often a consumer’s best bet, something I hadn’t considered, though I do have some investments in an ING account.

* Don’t compromise on services if you do make a bank switch.

One of the ways that we’ve kept our finances on track–and saved paper–was by having all of our bills paid for online and electronically via Wachovia’s website. This ensures we never send in a payment late and that a check never gets lost in the mail. If I were to switch to another bank, I would want to feel confident that I could find similar conveniences with the new bank. Same with reduced ATM fees (if any at all) and no charge for ordering checks.

We’ll probably sit tight until the acquisition dust settles. However, once I have a better sense of how much my banking will change (or stay the same), I’ll know the answer to should I stay with my new/old bank or should I go.