Updated: Jun 1
"Tired of the big banks, maybe you should try a community bank or credit union. Community banking continues to be important and relevant to the communities they serve even in the era of banking consolidation and financial technology modernization."
By: Allan R. Kirby
Community-Based banks vs the Big Banks
Ever since I was first old enough to bank on my own, I have always had a banking relationship with at least one community bank or credit union. The reasons are simple, they are so much better when it comes to personalized financial services and I have always loved their low fees. Granted you can get high-interest rates on deposit and no-fee banking through online-only banking, but I still prefer having at least some brick and mortar banking.
When looking at community-based banks and credit unions vs the big banks, they have many advantages such as:
Better rates on savings accounts and certificates of deposits.
Competitive mortgage rates.
Fees tend to be lower at Community Banks and Credit Unions.
Local deposits are used to make loans to local businesses.
Community Banks and Credit Unions tend to have a better understanding of the communities they serve.
Community Banks and Credit Unions tend to have a more personalized customer service experience and have higher customer satisfaction rates.
Community Banks and Credit Unions provide local jobs and support local charities.
"Superior service and support to customers will continue to be the foundations of community banks and credit unions."
As you can see, there are many benefits to using a local community bank, however, I do understand that some readers, may roll their eyes over my article either because they had a bad experience with a community bank or they think smaller banks are no longer relevant. I am fine with that but from an overall perspective. I firmly believe smaller financial institutions will continue to play a critical role in our communities and will be around for a long time to come. But do not take it from just me, take the time and read reviews such sites such as Yelp and Google on local community banks, and credit unions, I think you will find a high number of positive reviews and will be hard-pressed to find any serious issues. Then take a look at a major bank, you will find the opposite, you will be hard-pressed to find positive reviews. So with that in mind, let's take a closer look at some of the benefits of using a local community bank.
#1 Superior customer service
As I had just mentioned, if there is one thing that stands out with a local community bank is the high number of positive reviews they get due to superior customer service. It's the cornerstones for all community banking and credit unions, the ability to provide excellent services to their clients. I have had the pleasure of dealing with a number of credit unions over the years and even today I still bank at a credit union. They have never let me down and have always helped me when I have had issues. This cannot be said for many of the larger financial institutions I have dealt with over the years. I am still not sure if it's not just bad luck but I have had so many bad experiences when dealing with the big banks. The number one problem with the big banks, poor customer service.
"Overall most Community banks and credit unions provide higher interest rates on deposits and lower loan rates."
#2 Better deposit rates
Along with better customer services, what attracts me to smaller community-based banks is the higher deposit rates I get. One of the biggest pet peeves I have had over the years with my deposits at the big banks is the low-interest rates I receive along with high fees of course. I will admit not all community banks and credit unions provide good deposit rates but I have found better loan rates every time I compared rates to a major bank. Additionally, I have found major banks are less flexible with their rates and it can be tough negotiating with them. This has never been a problem with the local banks I have dealt with.
"Credit unions help communities - Deposits from customers and business directly support the local economy and profits are reinvesting locally as well."
#3 Similar IT services are available
While smaller banks may not have a full set of integrated services available online, they nevertheless still provide full online banking services such as mobile check and email deposit, online bill payment, and transfers. You can also find most community banks and credit unions have fully functioning mobile apps (Apple App Store, Google play) that allow you to check your balances, transfer funds, and find ATMs within your community. So it's not all that bad when dealing with community banks, they should have the services you're looking for both online and in-person to meet your overall banking needs.
Private Tech is Helping
Today we are seeing more and more companies offering services to help close the gap with larger banks. Some examples include Eltropy and nCino. Eltropy for example helps credit unions by facilitating, through their text messaging technology, loan applications, debt payments reminders, and status on loan applications. Their technology also allows for secure e-signing while also maintaining a high level of security.
nCino is another company which currently billing itself as a worldwide leader in cloud banking is helping smaller community banks and credit unions to help improve their bank end processes with the nCino Bank Operating System. This support automated and best-in-class workflow automated system helps financial institutions with end-to-end loan origination and account openings for retail and small businesses.
In the new digital banking world, the future of community banks and credit unions looks good with new technology companies helping them improve the speed and efficiency of their customer support and processes.
Final Thoughts - Why Community Banking Matters
Community banks and credit unions do matter because they provide critical financial support to the communities they serve. Without a bank, local communities will find it difficult to survive and could hinder economic development over the longer term. So when community banks and credit unions succeed so do the communities they serve, it's a win for everyone.
Here are a few reasons why Community Banks and Credit Unions Matter:
1. They Leverage local deposits from clients in order to provide loans to businesses and customers from the same community.
2. Provide critical support to small business owners and the agricultural community.
3. Support the community through investments and donating to local charities.
Community banks certainly do not have the size and scope of the big national banks, but as you can see they do play a critical role in the communities they operate in. Additionally, over the last decade, many larger banks have closed branches in many communities across the USA however this has presented some opportunities for community banks and credit unions to grow their business. As a result, we expect to see community banks and credit unions continue to thrive in many communities in the coming years. So if you are tired of the big banks may be a local community bank or credit union will be the perfect financial institution to meet your banking needs.
This is a MySmallBank.com blog written by Allan Kirby, who writes and produces Personal Finance articles and videos.