Choosing a Bank – Part 1 – Local vs. National

A very interesting and difficult choice people face, regardless of if they are looking for a savings or checking account, is which bank to put their money in. While there are several factors influencing this decision, one of the biggest in today’s age is deciding between a smaller, local bank (Signature Bank of Arkansas for example) and a national bank (Wachovia, Wells Fargo, Bank of America, Chase, etc). This will be the topic of this first post in a three part series on how to choose a bank.
In my mind, I believe this choice is very person-specific, and it is hard to provide guidance one way or another. However, to assist in the decision process, I figured it might be useful to describe some of the pros and cons of each local and national banks.
National Banks
Pros
  • Easy account access if you move. This was probably the biggest factor in my decision to choose Bank of America for my main checking account. They have branches all across the US, and if you have been moving as frequently as I have the past couple of years, it makes life a lot easier to not change banks.
  • Easy account access on vacations within the US. National banks also have affiliations with foreign banks to avoid ATM fees when you are abroad. This comes in very useful if you are traveling out of the country!
  • A top notch online banking system backed by a team of computer network geniuses.
  • Money is safe and FDIC insured.
Cons
  • Less personal service.
  • Expect to be encouraged to use the ATM for deposits and withdraws, and be discouraged to go inside to the tellers unless you have a special circumstance.
Local Banks
Pros
  • Super personal service. Many local banks even know you by name when you walk in the door.
  • More likely to take a chance on you if your credit history is only “so-so” for loans. This is done because it is important for their future business to retain you as a customer.
  • More likely to give you a personal loan to build your credit. See previous post on that topic at the following link: Part 3 – Build Your Credit History From Nothing
  • Money is safe and FDIC insured.
Cons
  • Essentially the opposite of the pros of national banks shown above. You will have to change banks when you move if you have your account with a local bank.
  • You will not have your local bank’s ATMs available when you go on vacation. This could result in ATM usage fees at other banks if cash is needed in a pinch. However, local banks are catching on to this gap these days, and are setting up aggreements with other banks that allows you to avoid this ATM usage fee. Stay tuned for a future post about that topic!
Ties
  • Relating to interest rates on savings accounts, unfortuantely, there is no clear winner here. According to this link Bank Rate Comparison of Savings Interest Rates, the highest interest rates in the country come from a mixuture of local and national banks.
  • The verdict is also still out on where to go for the lowest interest rate on a home equity loan. The key here is to shop around as much as you can to compare the rates of different loans that met your specific criteria. For example, I performed an interest rate search on bankrate.com (see the following link Charlottesville, VA home loan rate search) to get a feel for the lowest interest rates available in the area. Then, no matter if you are working with a local bank, national bank, or mortgage broker, you would want to make sure you are getting a comparitive deal. It is also important to keep in mind that you do not have to get your home equity mortgage from the same place your checking and savings accounts are, although you sometimes can benefits from combining accounts under one institution.
To give you all some additional information to aid in your decisions, I found the following link useful as well:
Keep on learning!
Jacob
To read Part 2 of this series, click the link below:
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About the Author Jacob A Irwin

Hi folks! My name is Jacob. I am the owner and operator of My Personal Finance Journey. I started this blog in January of 2010 and have enjoyed the journey ever since. Since finishing up graduate school in Virginia in 2014, I have been working in biopharmaceutical development in Colorado. You can read more about me and this site here​. Please contact me if you have any questions!

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