To go with the mega-bank or the community bank? That’s the question many consumers are facing in the wake of America’s financial crisis.
In the aftermath of the economic downturn and the failures of some of America’s biggest banks, some customers have transferred their accounts to smaller community banks. At the same time, community banks are struggling to keep up with the convenience factor offered by large banks’ plentiful branches and ATMs.
Banking with a small banks or banking with a big bank each comes with certain advantages. When choosing a bank, the most important question is not, “Do I prefer a big or a small bank?” but rather, “Which bank is best for me?”
Big Banks vs Small Banks: What’s the Difference?
Financial institutions can generally be divided up into three subsections: large banks, community banks, and credit unions.
Large banks commonly have $500 million or more in total assets. Community banks are like large banks, but smaller: Usually under $500 million in assets. Credit unions are different. A credit union is a financial institution that is cooperatively owned by its members. They typically claim about the same total assets as community banks, and 75% of them have less than $100 million in assets, but their size can vary widely.
Advantages of Big Banks
Historically, the greatest advantage big banks have claimed has been their ability to offer banking services for individual consumers and business customers alike. Those extra services were especially useful for customers who traveled frequently.
In the early years of ATMs and Online banking, big banks had the resources to build large, convenient networks that couldn’t be matched by smaller competition. This remains true — the multiple branches offered by big banks in cities and states across the nation add convenience and save money.
But other traditional competitive advantages have eroded. Online banking services, for example, have become a common feature for big and small banks alike. Convenient access to account balances and transaction histories is no longer limited solely to big banks, as technological advances have helped banks across the board.
Advantages of Small Banks
Many small banks, community banks, and credit unions offer better customer service than the large institutions do. It’s simply easier to have a personal touch in a smaller setting. A number of bigger banks are hiking fees and penalties to shore up their crumbling finances, including making their credit cards more expensive.
In many cases, community development banks and credit unions offer customers low-fee and no-fee savings and checking account products. Their loan terms are often more attractive, and the loan interaction process is usually more direct between the customer and lender. These factors offer an opening for smaller competitors.
Weighing Your Options
Weighing pros and cons always comes down to what is most important to the person doing the tallying. Now more than ever, it pays to shop around.
Some of the questions you need to ask include:
• Are the banking services offered sufficient?
• Is the cost of doing business low?
• Is the customer treated fairly?
• Is the institution’s Online presence is up-to-date?
In many cases there is no downside to going small and independent, but your options could vary widely depending on where you live.
What are you looking for in a bank? How you answer that question could go a long way toward determining if you would be happier with a large bank or a small bank.