Battle of the Banks: Local Versus National

There’s a lot to consider when choosing your bank. After all, the fate of your hard-earned money lays in the decision. The institution charged with keeping your funds secure and fostering their growth into a sizable sum has a lot of expectations to meet.

Usually, consumers look for banks that offer competitive interest rates. This is important, of course, but there are plenty of other characteristics to consider before committing to an investment.

Factors like accessibility, customer service and online banking options are all things that should be scrutinized before choosing one type of bank over another.

Often, finding the best bank comes down to whether it’s a local or national bank. Both have valuable banking services to offer consumers, but one tends to outdo the other. So which is better, local or national banks? Let the battle begin:

Local Banks (including credit unions)

Community bank

Local banks are often referred to as community banks (which differ from credit unions). They are locally owned and operated banking institutions and offer all the traditional banking services like checking and savings accounts, home loans and operate under the same set of laws that govern national chain banks.

Advantages of Local Banks

Loans: Due to the fact that local banks strive to aid the communities they serve, the decision to lend money is made by people who understand the particular challenges and financial needs of local residents and businesses. This sometimes makes it easier to obtain a loan that a larger bank may not approve.

Interest Rates: Local banks almost always provide the highest rates for accounts. Why is this the case. Simply put, national banks don’t bother with competitive rates because they don’t need to.

Most people flock to national banks because of the name recognition and perceived stability due to their size. Local banks must compete for customers and offer higher rates.

As Greg McBride, senior financial analyst at Bankrate explains, “They can’t buy TV ads or plaster the town with billboards…It is more cost effective to pay higher rates on deposits.”

Customer Service: While national banks tend to treat customers like just another account number generating the institution revenue, local banks offer more direct contact with top executives and personal attention and service. Arron Skloff writes in the Princeton Business Journal, “employees on the front line have more discretion to make decisions than a larger bank that must follow stricter policies and procedures from corporate headquarters.

National Banks

National banks are generally large financial companies that operate across the country and even internationally (think of Bank for America. 

They are legally required to be members of the Federal Reserve System and their charter is approved by the Office of the Comptroller of the Currency (OCC) rather than by a state banking department. They are usually very large in size and visibility.

Bank of America Image

Advantages of National Banks

Location: National banks are big and are therefore more accessible to customers than local banks. Branch and ATM locations are spread out across many cities, states or even countries, making it easy to obtain banking services when you need to, no matter where you are.

Technology: Though just about every financial institution is catching on, national banks tend to lead the way when it comes to internet banking. For example, Chase now lets you deposit checks from anywhere with an iPhone app. Don’t expect your local bank to offer the same capability.

Size: According to a brief on Focus.c0m, community banks tends to have assets of $500 million or less. That may seem like a huge amount, but not when compared to one of the world’s largest and most well known banks, Bank of America, with over $3.5 trillion in assets. What does this mean for customers? More money is available to fund loans.

And the Winner Is…

There are circumstances when you benefit more from banking with a large, national bank. Anyone who travels frequently and requires access to their bank from any location won’t find a local bank adequate.

Additionally, local banks cannot handle the needs of large businesses conducting multi-million dollar transactions and loans. The national chains are best suited for these situations.

Even so, when it comes down to the financial needs and goals of the average person, local banks (and credit unions) have much more to offer and are usually the best choice. Customers of local banks enjoy the best deposit account interest rates, lowest loan rates and highest level of customer service, which are arguably the most important aspects to consider when choosing a bank.

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2 thoughts on “Battle of the Banks: Local Versus National”

  1. Dont write off credit unions either! Remember they are not for profit and member owned institutions. If you’re looking for better savings rates, some of the smaller ones that specialize in auto loans on the loan end can sometimes offer slightly higher rates on the savings end.

  2. In my experience, credit union lenders and community bank lenders are much more alike than different compared to community bank lenders and large bank lenders. So much of what the Governor had to say about community banks directly applies to credit unions as well.


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