When it comes to banking these days, whether we are opening checking and savings accounts, seeking a loan, or transacting other business, we are faced with a number of choices. One of them is whether we want to do business with an online bank, a large banking corporation, or a local community bank or credit union.
There are several advantages to doing business with a local bank. These include:
- More personal service. Community banks typically offer actual face to face service in a traditional brick and mortar building.
- Vested interest in your community. Community banks and credit unions generally service a particular town, city, or region, and have a vested interest in the continuing prosperity of that area.
- Understanding of local issues. While banking with a local bank is no guarantee that a local disaster won’t force you to clean out your savings accounts, it does offer you the opportunity to do business with people who have their hands on the pulse of your local community, including its economic and other struggles.
Larger banks also offer a number of advantages, of course. For one thing, because they are considered too large to fail without having serious repercussions on the national economy, the federal government tends to back the larger banks in ways that small banks don’t enjoy. This drives down their operating costs.
While this undoubtedly causes an unfair playing field, it can benefit you if you bank at one of the larger banks. The fact that their operating expenses are mitigated somewhat by the federal government’s assistance can translate to slightly better yields for you.
Another option you may want to consider is online banking. Online banking cuts its costs by eliminating the brick and mortar structures and operating with a much smaller staff, proportionately speaking. The interest rates offered are often significantly better than even the largest traditional banks. Online banks are an especially attractive option for long term savings vehicles like CDs, IRAs, and high yield savings accounts.
Where to bank is, quite obviously, a personal decision. You have to weigh for yourself whether or not the interest rates of larger banks and online banks outweigh the personal service and community involvement of smaller, community oriented banks and credit unions.