By Zachary Ehrlich  Thu Sep 29, 2011

Big Banks vs. Small Banks: Which to Choose?

Choosing the right bank may be more difficult than simply following your parents and will require some attention on your part. Like most of the choices you will make in your life, choosing a bank should only be done after weighing all your options and gathering as much information as possible.

Highlights:

  1. Choosing a bank means determining your needs and interests.
  2. Local banks make up a large chunk of the banking market.
  3. When comparing banks, focus on convenience, rates, fees and service.
  4. Local banks and big banks offer different pros and cons.

In trying to determine what type of bank best fits your needs and interests, you will most likely choose between a big, global bank and a small, local bank. The two have many similarities and essentially provide the same service, but they differ when it comes to some important nuances of banking.

Now you may be much more aware of so-called “big” banks (banks with more than $10 billion in deposits), but community banks should not be scoffed at. They represent about 30 percent of the banking industry, and no matter where you choose to go to college, there will almost certainly be a local bank servicing the area.

To determine the best banking options you must ask yourself a few questions to better understand your needs. And, parents aside, once you know what you’re looking for in a bank, it’s a matter of comparing what each bank offers.

First ask yourself how important convenience is to you. If you are the type to constantly make ATM withdrawals, consider that larger banks offer many ATMs all across the country, which means fewer fees for withdrawing money. This will also be useful when you travel.

Other factors at play for students looking to open an account are the rates the bank offers. Local banks and large national banks can vary greatly when it comes to rates on loans, CDs, savings accounts and MMAs.

Generally, local banks will pay out better rates than larger banks. If you use an online comparison tool, you may see a bank you’ve never even heard of offering the best rate.

While you are comparing rates, take the time to look at each bank’s student checking account features as well. Understand what perks the bank offers, such as free debit card, native ATM usage, online banking and check writing.

After assessing accessibility, rates and fees, take a look at their service. If you plan on being an active member in the banking community and visiting your local branch often, customer service can play a big role in your decision. This should get you to ask yourself, “Would I rather bank online or in-person?”

Generally big banks and small banks have stigmatic pros and cons.

Big banks offer:

  • Access – ATMs and branches all over the country; travel will not cause issues
  • Online presence – Faster and more user-friendly online experience
  • Uniform service – Each branch will follow a certain standard

Local banks have other benefits:

  • Personal service – You are more than just a number and they value your business
  • Community oriented – Decisions are made with you and the community in mind, which provides stability and limits risk
  • Wiggle room – More power to negotiate when it comes to fees and loans; they value your business and are less likely to nickel and dime

Take the time to weigh the pros and cons before making this very important decision. You should also consider the option of an Internet bank while you’re at it.

Key Takeaways:

  1. Choosing a bank is a decision that needs to be weighted carefully, with your personal interests and needs in mind.
  2. While big banks are more recognizable, local banks compose the majority of the market.
  3. Convenience, rates, fees and service are key determinants in choosing a bank.
  4. The benefits of one bank can be the weakness of another.

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Add Your 2 Cents

  • Dillon Davis

    Despite the negative Bank America rant, I appreciated their mega presence.  Chase had done me wrong years ago raising interest rates on credit cards for absolutely NO JUSTIFIABLE reason, Fthem!  But BAC seemed to be in tune with consumers.  So… Perhaps BAC has an agenda to retreat from retail banking.  Because there are still viable alternatives for clients with less than 50K.  Bye-bye BAC!  Local FUC’s are looking for our business.

  • Dillon Davis

    USAA!  Okay, they don’t have the best savings rates, not the best interest of Vets vs: bank, but they do offer a range of services that show their desire to have you as a client.  I keep funds in a USAA checking account because of their ACH transfers, along with a local FCU.  Do not let the mega banks crying lead you into false acceptance of their greed!  Hey! Nothing wrong with greed, so long as we, the average citizen do not have to pay for it!  ”Let the buyer beware”.