You Should Put Your Money in Your Local Bank
Having a bank ( or two ) is one of those dull, boring and generally necessary adult things that we all just do . At some point in your life, you received your first paycheck and needed somewhere to put it, so you opened a bank account. When we think about banking, we usually focus on getting the best interest rates and lowest fees we can find, which usually leads us to a large national bank.
Large banks offer many conveniences: you can usually contact them at any time, they offer a wide range of services, and you can manage much of your financial life from your phone. That’s great, but smaller local banks ( defined by the Federal Deposit Insurance Corporation [FDIC] as banks with less than $1 billion in assets) aren’t just smaller—they also offer many benefits that larger national or online banks can’t.
Lower rates and fees
Just having a bank account can be expensive. Between ATM fees and overdraft fees , it can feel like you’re paying rent to park your money somewhere.
Local banks typically offer much lower fees and fewer fees than national banks. The Consumer Financial Protection Bureau found that overdraft fees at small banks are as much as 19% lower than at large banks. And this is true for the other side of this coin – interest rates. If you need a credit card, you’re probably better off working with a local bank, where interest rates are typically 8 to 10 points lower than larger banks. In addition, local banks charge much less annual fees. This can lead to significant money savings over the course of the year.
Best service
Your big bank doesn’t really care about you or even know who you are. This is why banks sometimes close your account without explanation and force you to navigate through confusing phone menus when you call their supposedly 24/7 customer service line. A local bank will offer you a much more personalized service, including personal customer service when you need it. This is one of the main reasons why local banks typically have a net customer satisfaction rating of 74%, compared to 56% for larger banks and a dismal 40% for online banks.
This more personalized service can impact more than just your satisfaction as a customer. When you need a loan, local banks often prioritize ” relationship banking .” This means they take into account more than just your credit score and net worth when you need to borrow money—they will consider your relationship with the bank, your spending history, and the potential impact of the loan on the community itself. This will make it easier to borrow, and you’ll likely get a lower rate as well.
Community Benefits
Finally, community banks are not just banks, they are members of the local business community. So they are interested in investing in this community. Larger banks tend to be more focused on making a profit on their investments—investments that typically have little to no impact on your community—but smaller community banks tend to be more focused on “productive investments.” Local banks make more than half of their loans to small businesses, so your money directly benefits your community. This will also benefit you because the local bank will know the community well, which can be a convincing factor when you are looking for a loan or investment for a business or service that will benefit the local area.