Big Banks vs. Small Banks: Which is Right for Me?

Big Banks vs. Small Banks: Which is Right for Me?With all the publicity in recent years on the exorbitant fees big banks are charging, along with the dissolution of more and more community and neighborhood banks, I have been re-evaluating where to do my banking.

It is not easy switching banks to begin with, especially for those of us with more than one account, CDs and a mortgage tied into it. Throw in my online bank account, and I’m probably looking at a day’s worth of work to cover my bases.

However, having banked with the same institution, albeit one that has changed hands several times over the last 25 years, it probably is a good idea to make myself aware of the positives and negatives of dealing with a larger bank such as mine vs. a smaller, local bank.

I have minimal experience when it comes to small banks, having opened a small business account to keep funds handy for tax purposes and business expenses. Unfortunately, I found out too late that its location, which only allows right-hand turns upon leaving, is not the most convenient. However, because they don’t charge me a monthly fee, unlike the larger bank that I deal with, I’ve found that it’s worth doubling back through town when leaving.

Unfortunately, I also recently discovered that the smaller bank’s drive thru hours on Saturday are a half-day shorter than my larger bank. This means that the paycheck I’ve been waiting on cannot be deposited until Monday.

In contrast, the larger bank seems to provide convenient access to locations in almost every town I frequent. This makes it convenient to grab cash fee-free or deposit that check on my way to the store or while running errands.

With big banks in a multitude of locations, I’m saving money, not only on ATM charges, but also on gas. And, come to think of it, my big bank is directly next to my gas station.

If I move, I don’t need to worry about switching banks, since my larger institution is national.

Still, there is the issue of customer service. My smaller business bank has a smaller number of employees, and there are a couple that call me every so often to check in. Yes, I am happy with your services, but just wish I could turn left when I leave to go home!

With the big bank, I don’t get phone calls, only lots of promotional materials soliciting me to open more accounts, apply for a loan or use checks against my credit card account for ‘instant cash.’

If you’re deciding on changing from a big bank to a small bank or vice versa, consider what’s most important to you…

  • Will you be visiting the bank location frequently? If so, consider its hours.
  • Is the bank conveniently located? This is important if you need to make many ATM visits during the week. Those fees can add up.
  • If you’re like me and have a variety of accounts, shop around for the bank that best fits your needs. Realize that while business accounts at some banks charge a monthly fee, other banks (in my case a smaller financial institution) will provide free small business accounts.
  • Especially with smaller institutions, make sure the bank you choose is FDIC approved so your funds are guaranteed if the bank goes out of business.

Customer service at smaller banks tends to be more personal, which is important when you’re dealing with money issues.

This brings to mind an incident I had at a former larger bank with a business account. Although I had opened the account under my corporation’s name, the checks I was receiving from clients were under my name. This wasn’t a problem until three years after I opened my account, after depositing numerous checks during this time. The teller refused to allow me to deposit checks made out to me, even though my account had my name and the name of my corporation attached to it. Even calling the bank’s corporate customer service line did no good.

I ended up leaving this bank and moving to the smaller bank that I now use. The staff here was eager to assist me in setting up my account and seeing to my banking needs.

Although the economy has proven that not all small banks are up to par, I’ve found that the exceptional customer service and fee-free accounts make them worth considering for my banking needs.

If I see any more banking fees on my big-bank statements, I may take the time to move the rest of my money from my large bank to the smaller one. These days, a little inconvenience is worth the extra cash in my pocket.

6 Responses to “Big Banks vs. Small Banks: Which is Right for Me?”

  1. Anonymous

    I moved from Wells Fargo to a regional credit union with about 15 branches in Southern California. I was fed up with Wells Fargo’s fees, the bailout, the lack of customer service and the constant increasing of rates on my credit card. So I opened up an account across the street and just started depositing my funds there. When I closed at Wells Fargo, they asked me if there was anything they could do to keep me as a customer. NOPE! I had already moved my money, so no fake incentives would work.

    I was concerned, however, that I wouldn’t be able to access my money as easily with a credit union. That turned out not to be the case, since my credit union (and most credit unions) join together in networks, allowing you to access your money at any credit union ATMs for free (no fees charged on either end) and even being able to deposit money to your account at another credit union.

    That obviously vastly increased the number of available free ATMs I can use throughout the nation when I travel. I can even make deposits or access my money without charge at most 7-Elevens.

    Then there’s the much higher interest rate I get on my savings account (though still in the dumps), the free coinstar-type service, the low loan and credit card rates… I could go on.

    Last, but definitely not least, when I call for customer service, I get connected with a call center down the street without having to bash “0” for more options over and over again.

  2. Anonymous

    Slightly off topic, but something to note.

    If you set up your business as an LLC or some other separate corporate entity, one of the reasons to do so is so that if you ever get sued, the other side can only go after the corporate assets. If you lose in court, the other side only has the right to come after your business’s assets, with the theory being that they knew that they were dealing with a business.

    If you get paid with checks in your name, however, the other side will have an argument that they thought that they were doing business with you personally. If they convince a court of this, they can then go after your personal assets (your bank accounts, your house, etc.).

    The big bank was actually helping you from a legal standpoint by not allowing you to deposit checks made out to you personally in the corporate account. Mixing personal funds with corporate funds is another factor looked at to see whether someone who sues you should be limited to just going after the corporate assets or should be allowed to go after your personal assets. The argument is that if you don’t treat your corporate and personal assets separately, why should the court.

    You can see more if you put “piercing the corporate veil” into Wikipedia. Love the financial advice though.

  3. Anonymous

    “Move your money project dot org” website is a good place to go to see the reasons for moving money from the big banks to a community bank.

  4. Anonymous

    I moved our banking from a big bank to a local credit union. The rates are better and I just use the checking account to take money out of the ATM when I need it. My main bank is 1500 miles away in San Antonio. They pay other bank fees up to a certain limit per month if the account gets charged. My CU just got taken over by a San Antonio CU also but they have good rates too. I think one should read up on banking in this country and see the history of the “too big to fail” banks. The book “The Creature From Jekyll Island” about the formation of the federal reserve by the big banks is a good place to start. If all americans would stop using big banks and only local banks they would change banking for the better in this country. By using a local bank the money stays in the community. The way interest rates are now it won’t cost much in lost interest income to keep a stash in the house either.

  5. Anonymous

    I moved my personal and small business accounts from BoA about a year ago to a local credit union after being with BoA for about 11 years. The primary reason was because of the fees that kept showing up. For a while, I could get them removed by going in, but eventually that didn’t work either.

    Since switching, BoA has shut down branches and cut back on hours. The credit union now stays open until 5 on Saturdays. The business services aren’t as good now, and the ATMs aren’t as smart.

    I am supporting the local economy, have good customer service, and take out the cash I need before traveling (typically 2-3 weeks a month). Oh, and I took a personal step to prevent a bank from being “too big to fail”.

  6. Nickel

    We keep the majority of our money with an online bank, but we do have some local accounts – with Bank of America no less. I like this arrangement because it gives us access to higher yields online while maximizing our local banking access. BofA has ATMs and branches almost everywhere in the United States, and I/we travel a decent amount so it’s very nice to have that kind of access.

    Also, the staffing at our nearest branch has been very stable over the years (in terms of “personal bankers” if not tellers) so we always see the same faces when something needs to be dealt with, and they are at least somewhat familiar with our situation, similar to what you might have with a smaller, local bank.

    Regarding the not having to change banks when you move, that’s nice but not entirely true – at least not with BofA. When we moved across state lines, we still had to close/re-open our checking account because it was somehow tied to our state, and it caused our now-local check deposits to be treated as out-of-state checks, which were thus subject to a longer hold.

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