Ask the Readers: Are Local Banks Better Than Big Banks?
Published on - December 12th, 2008 (Modified on - December 15th, 2008) (by J.D. Roth) Personal finance is about more than just money. People make financial choices because of emotion, of course, but they also make decisions based on their principles. Some people are guided by their faith. But that’s not the only way a person’s conscience can guide him. Josh recently wrote with a question about finding a bank that better matches his personal philosophy:
I’ve been doing a lot of reading about the economic crisis, and about the big banks being bought out and changing hands. This got me thinking a lot about banking locally.
I’ve been a Chase customer for 13 years or so, ever since college. The things going on now in the banking industry are not just scary but, in a lot of ways, unethical. When I read about the types of things these banks have been involved with other the years, it makes me want to take my business away from them.
I was wondering if you had any thoughts on big banks vs. local banks. My wife and I have embarked on an “eating local quest” in an effort to save money, eat better, and support local farmers, and I wondered if banking local has a similar effect.
Josh hopes to stay true to his principles while also satisfying his need for quality banking products and services. What choices does he have? I can think of two options Josh should explore:
- Community development banks are designed to serve residents and spur economic development in low- to moderate-income areas. An example near me is Portland’s Albina Community Bank. Nationally, ShoreBank has many locations. The Community Investing Center offers more information about community development banks, including an online database.
- Credit unions and small local banks are another option. They generally offer excellent (sometimes personalized) service and policies that reflect the community. They can have surprisingly good financial products, too. Last month, for example, I wrote that the best checking account can usually be found at a local bank or credit union.
I was an account-holder with a major U.S. bank for eighteen years. I paid an $8 “service charge” every month, as well as many other fees. Worse, I had to put up with truly awful customer service. (The bank insisted, for example, that I was stuck with that $8/month fee, even though they had long since waived it on my wife’s account. They were also notorious for waiting to process loan payments; no matter how early I mailed them, they would show up a day “late”.) I hated the place, but I was afraid to change because I thought it would be difficult. It wasn’t.
Moving my money to a local credit union was one of the best financial decisions I ever made — and it saved me $96 a year!
Now that I’ve turned into a money geek, I keep my funds in different locations based on needs. My business funds are with a large national bank that seems sound. My immediate money is split between two local credit unions. And my long-term savings are in an online savings account.
What about you? Do you keep any of your money with a local bank? Why or why not? Did you have to sacrifice anything — service, convenience, interest rates — to do this? Or do you intentionally avoid small banks? Can you offer Josh any other advice as he searches for a bank that better matches his personal philosophy?
Update: Josh has responded to your comments. Thanks, everyone!
This article is about Ask the Readers, Choices, Odds and Ends
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YES! I’ve been a member of my hometown credit union for 20 years – Philadelphia Federal Credit Union. While I no longer live there, with direct deposit and free ATM transactions at McDonald’s, I hardly notice.
The customer service is FANTASTIC, and most importantly there are rarely ANY fees.
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I guess that I’m a little different from everyone else. We used a local bank and another local credit union for the last 14 or 15 years. They didn’t offer anything more than Bank of America… nothing free and they weren’t anymore forgiving of fees either…and they weren’t convenient. I figured, might as well go with BoA and get convenient access. Since I did I LOVE their bill pay and online access.
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My credit union (which has about a dozen branches in two states) was simply the best deal I could find at the time I opened it. The national chains all wanted monthly fees or more stringent conditions on my account. It’s been open for about a decade, so it’s possible there are better deals than “free” out there, but I’m happy enough with what I have that I’m not planning on switching any time soon.
The only other thing I would consider is an internet-only bank. I don’t write nor deposit a lot of checks, and only visit an ATM once or twice a month, so an internet bank would work well for me.
I won’t consider a big, national bank until they stop trying to charge me for the privilege of holding my money for me.
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I have had accounts with a Credit Union since I was a small child and my parents opened a savings account for me there. A few years ago I finally opened up a checking acount, which I’ve been very pleased with. The credit union has even waived an overdraft fee for me recently and returned the $28 charge to my account. Also, there are many good incentives, such as 10% APY on a savings account with less than 1k in it – perfect for me, a college student.
The credit union I am with also offers online banking and bill pay – I always check my balance online, and I am able to transfer money to my parents’ accounts and vice versa without seeing each others’ balances. Being in college, this is very helpful, because I pay my parents for my cell phone bill and half my car insurance each month, so I can just transfer it online to one of their accounts and be done with it.
The only thing I have discovered to be inconvenient is ATM fees, since most ATMs are owned by large banks. Although I don’t withdraw cash very often and rely mostly on my debit card, if you are someone who does withdraw cash frequently this could be very inconvenient since most ATMS charge around $3 in fees per transaction.
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I’ve been using my local credit union for years, and I couldn’t be happier. Free checking, no ATM fees, and an interest rate that rivals those of ING, etc.
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I am actually preparing to switch over to smaller bank after BofA customer service gave me the run around on some overdraft charges. I was getting paid on the 26th and had an automatic payment set to be delivered by the 27th. I expected it to clear on the 26th. WRONG! It cleared my account on the 24th! I also had purchased a Christmas tree and gift card that day. This left me with $70 of overdraft charges. I email them trying to get an explanation as to why if I set up a charge to clear by the 27th, it is clearing 3 days prior. They gave me a lame answer basically blaming my car company for depositing the e-check early and refused to reverse any charges. I am done. My husband uses a smaller bank and has no problems with them. I don’t I’ll go back to big bank after this transition.
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Here in Canada, we have national banks and we have local credit unions. My sig. other used to do her banking at the local credit union, but is changing to TD Canada Trust because of their excellent business hours and helpline. Online banking is easy enough with them, but their website isn’t very user friendly.
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I was an Operations Officer in a local bank for many years, before the bank was bought by a large holding company. It was soon absorbed into a larger bank, owned by the holding company.
Customers were no longer treated as individuals. Fees increased, sometimes 25 fold. Courtesy services the bank had always provided for its customers were no longer allowed.
I met with various officers of the new bank and explained that we were losing many of our valued, long-time customers, and received the response, “Who cares? There are other customers out there who are looking for a bank.”
I stayed for a year trying to find ways to still provide personal service to our customers, and trying to show the value of these services to the new bank management. When I resigned, top management was dumbfounded and tried to find a way to make me stay. I gave them a list of 74 reasons why I could not do that. They read the list, agreed with what I had written and then said that a larger bank could not do what the smaller bank had done so easily for years.
I have had many regrets that I was not able to improve the situation for our customers, but no regrets that I chose to leave the bank.
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I just recently got an 8k loan from a Federal Credit Union at a great rate. I used this money to pay down my credit card debt.
I also just saved $264 today by spending 10 minutes on the phone with Bank of America. I have a Business Economy Checking account with them (as well as personal accounts) and they were charging me $22 per month in fees. All I had to do was ask them why. The rep said that they have a “new” plan where they won’t charge as long as you use your business debit card once per month. Um, yeah. I use mine all the time. So, if I hadn’t called, I would have never known about this new offer. Sometimes all you have to do is ask!
Meanwhile, nine of my close friends have been laid off from their very well paying jobs in NYC. These are super-educated people working in finance, web/design/IT, and large non-profits. I hope I can make my $264 stretch far enough to feed all of my pals. What a rough time.
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