I moved to San Francisco in the late 1980s, and I needed a California bank. Before I left the East Coast, I had done a survey of local banks and savings and loans for the ad agency where I worked, and that taught me that savings and loans were by far the better choice. S&Ls seemed much more focused on helping consumers and less on skimming profits from my bank account.
Savings and loans disappeared after the S&L crisis, but credit unions are very similar, and I have always stuck with local banks and credit unions for my business and personal banking. I've never regretted that decision.
The pros and cons of big banks
There are benefits to banking with a large national or regional financial institution. My credit union has no branches near where I live, and I sometimes have to pay ATM fees because I can't find a compatible ATM. However, with the rise of online banking, I rarely need to go into a branch these days.
The other benefit of large banks is national and even international coverage. If I moved to another state or spent time abroad, I might need to switch financial institutions. Some of the bigger banks have national and even international presence, so they might be a good choice for people who move around or travel a lot.
However, there are significant downsides to working with a big bank, such as higher fees. Since I moved to San Francisco, Wells Fargo has been sued repeatedly for defrauding customers, including several lawsuits in recent years. I feel safer with my money at more local (and ethical) institutions.
The most important aspect of a local financial institution, for me, is superior customer service. For example, when I first started banking with my traditional bank I incurred fees because I didn't understand a bank policy. I was able to call customer service, talk to a human, get the policy explained, and have the fees reversed.
More recently, when I was having issues with my business checking account, a kind bank employee at one of the branches changed how my account is set up to make it easier for me to deposit checks.
We have several accounts at our credit union
Credit unions are not-for-profit institutions, and I feel lucky to be able to have accounts at one, since membership is often limited to people in a certain profession, specific region, or working for certain employers. But once my wife's work gave us the option to join one, we've never wanted to put our money anywhere else.
The credit union has low fees and lets us set up multiple, linked accounts. That allows my wife and I to have two joint checking accounts, one for her and one for me. We each have control over our own finances, but we can access each other's accounts if needed.
And when one of us dies (hopefully a long time in the future), the other will be able to take control of all the accounts without probate or other delays. The ease and affordability of opening multiple accounts allows us to manage our finances the way we want while holding our money jointly.
We also have a savings account where we build reserves for travel and unexpected expenses. And we were able to open a second savings account to deposit money for our home expenses. Our mortgage payments come from that account automatically.
Perhaps my favorite thing about the credit union is that it holds our mortgage and, unlike other mortgage lenders, it will continue to service it even if the loan is sold. The credit union gave us a good rate and stability that I hope to stick with until we pay off the loan.
Working with a small financial institution isn't all rosy. Recently, our credit union app had a glitch and wouldn't allow me to deposit checks online because I'm the second name on the account. I had to have my wife make my deposits for two months, and it was annoying. But I'll put up with occasional inconvenience in exchange for local financial institutions that give me better service and more control over my money.
Laura McCamy
Laura McCamy is a freelance writer based in the San Francisco Bay Area.
Average account fees tend to be lower at small banks than at bigger institutions. Smaller banks, on average, offer higher rates on interest-bearing checking accounts, savings, and CDs. Also, smaller institutions provide better terms on credit cards and small business loans.
Adjustable interest rate APR based on corporate policy changes or product and service modifications can lead to lower earnings and additional costs. Big banks often charge monthly service fees for account maintenance, whereas local community banks are more likely to offer customers fee-free account service.
Perhaps the largest difference between small banks and big banks is the range of financial products and services they can offer. Big banks are generally capable of offering a larger variety compared to smaller, local banks, which may tailor their offerings to the population they serve.
Small banks may offer a more personalized customer experience, while big banks may be more comprehensive, offering an array of deposit accounts, loans, insurance, financial planning and wealth management.
Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.
Big Banks Not Necessarily Safer Than Smaller Institutions, Credit Unions. But for most customers, big banks are not necessarily any “safer” than other federally insured financial institutions.
There are other signs of mounting stress among smaller banks. In 2023, 67 lenders had low levels of liquidity — meaning the cash or securities that can be quickly sold when needed — up from nine institutions in 2021, Fitch analysts said in a recent report.
Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.
Big banks keep your savings secure, but they pay extremely low interest rates, so you'll lose money to inflation. You can get much better rates, and the same FDIC insurance as big banks, with high-yield savings accounts. With money you don't need in the near future, the best way to beat inflation is by investing.
Compared with megabanks, community banks and credit unions tend to charge lower fees on loans and pay higher yields on savings products. The Consumer Financial Protection Bureau in February found that credit cards from big banks tend to charge significantly higher interest than small banks do.
Keeping too much of your money in savings could mean missing out on the chance to earn higher returns elsewhere. It's also important to keep FDIC limits in mind. Anything over $250,000 in savings may not be protected in the rare event that your bank fails.
You can bank with confidence at your local community bank because no one has ever lost a dime of FDIC-insured funds. Community banks hold FDIC deposit insurance, which covers each depositor's account, dollar-for-dollar, up to the insurance limit ($250,000).
Banks can fail for many reasons, but generally they fall into a few broad categories: a run on deposits (which leaves the bank without the cash to pay everyone who wants to withdraw their money); too many bad loans or assets that fall precipitously in value (both of which erode the bank's capital reserves); or a ...
Finally, community banks are often insured by the Federal Deposit Insurance Corporation (FDIC), which means that your deposits are protected by up to $250,000 per depositor but can be structured to cover a larger amount on your account.
Additional analyses reveal the size increase did not improve banks' cost efficiency, but it negatively affected their opaque (small, young, low-collateral) customers, increased bank risk-taking, and raised the media presence of the consolidating banks.
Limited number of products and services: While community banks typically offer deposit products and loans, they might not have some of the specialized products more commonly offered by big banks such as credit cards and investment services.
Whether you put all of your eggs in the basket of traditional services like checking and savings accounts and loans, or whether you offer a broader financial services portfolio, most banks yield about 10-15% net profit, with 7-10% return on investment or equity.
Address: Apt. 994 8891 Orval Hill, Brittnyburgh, AZ 41023-0398
Phone: +26417467956738
Job: District Marketing Strategist
Hobby: Embroidery, Bodybuilding, Motor sports, Amateur radio, Wood carving, Whittling, Air sports
Introduction: My name is Prof. An Powlowski, I am a charming, helpful, attractive, good, graceful, thoughtful, vast person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
