The Benefits of Banking Locally
Some people think that all banks are the same. They give you a safe place to keep your money, and they provide options if you need a loan. How different could one bank really be from the next?
The truth is that you can find a lot of differences from one bank to the next. The biggest differences, though, are the differences between megabanks and community banks. Giant conglomerates can provide your basic banking needs, but community banks come with big benefits that the larger banks just can't provide.
What Does a Community Bank Offer?
Community banks are banks that serve local areas. They often have fewer clients than ordinary banks because they focus on their community's specific needs rather than taking a broader, more impersonal approach. One big misconception about community banks is that because they're smaller, they don't offer as many services that large banks offer. The truth is that community banks have all of the same services as their larger counterparts, including:
- Checking accounts
- Savings accounts
- CDs and other savings options
- Personal and business loans
- ATM access
- Debit and credit cards
- Apps and online banking
- And more!
Maybe in the past, community banks didn't offer quite as much convenience as megabanks, but these days, thanks to expanding technology, community banks have virtually all of the same amenities as their larger counterparts.
The Benefits of Community Banking
Community banks don't just have the same services as megabanks; They also have advantages that megabanks don't offer. These advantages are driving more people to switch from large institutions to smaller banks every day.
Local Economy Support
Want to support the local economy? Then buy from local businesses. When you buy local, you empower your community, keep more dollars circulating in your town, and help provide a better lifestyle for the people around you. When you buy from a local business, you don't add a few more dollars to a billionaire's pocket. You help a kid get karate lessons or parents put food on the table.
When you also bank locally, you take your economic support even further. For one thing, community banks employ community members. By supporting a local bank, you keep jobs in your community.
Community banks also provide loans to local business owners. By using a local bank, you help several local businesses thrive.
Plus, community banks help keep megabanks from crushing local economies. For that matter, they also help keep big chain stores from doing the same. Remember, local banks provide loans for local businesses. Without those loans, local businesses can get swept away by giant corporations where vest-wearing employees make minimum wage. And since these stores sell everything from groceries to clothing at cheap (read: exploitative) prices, they stomp all over local boutiques, grocery stores, and all of the other little shops that make a town unique.
Local Community Support
Interestingly, local banks support their communities with more than just their buying and lending power. Local bank owners understand what their communities need. They're far more attuned to those needs than an out-of-town megabank owner could ever be.
For instance, local banks support local nonprofits, sponsor Little League teams, and do other things that make their communities better for everyone. Local bank owners know their communities' biggest financial struggles, and they often step in to help alleviate those struggles. Some local banks have sponsored classes on saving for college, setting a budget, and similar financial topics.
Because your local bank was designed for your local community, it won't use the "one size fits all" approach that megabanks use. It'll provide real, tailored solutions as needed.
Lower Costs and Better Interest Rates
Need to cut back on some expenses? Consider switching to a local bank. Overall, local banks provide lower costs and better interest rates than their megabank counterparts. On loans, for example, you can expect to pay less interest than you would for a big bank loan. You may even earn more interest by moving your savings account to a local bank. You can also avoid certain other banking costs. For instance, while free checking accounts are getting harder to find inside big banks, many local banks still offer free checking.
The Pitfalls of Megabanks
Big banks get a lot of attention. You recognize their names, and you see them everywhere. They have plenty of money to spare for advertising, so you even stumble across them when you're relaxing in your own home. However, what these banks won't tell you is that they come with a lot of pitfalls -- pitfalls that people can avoid if they'd just switch to their local banks instead.
Potential Security Breaches
Not long ago, a conflict between the US and Iran led to security concerns for US banks. Iran launched a series of cyberattacks that targeted American assets, including American banking information. Of course, when it comes to protecting your finances, you don't just need to worry about major conflicts between nations. There are also everyday hackers, both from America and from abroad, who get more sophisticated and savvier all the time.
The targets for these attacks? Megabanks. It turns out that there's a downside to being so well-known. Thanks to all of that advertising, you could probably list a handful of big bank names without much thought. Well, so can hackers. And which American banks are more likely to get noticed by foreign enemies -- your average local bank, or the bank with branches and buildings all across the country?
Smaller banks are simply smaller targets, so they have a better chance of escaping unwanted attention. For hackers, the money - literally - is in the big banks, so why waste time finding and attacking the smaller ones?
Credit Score is Everything
Let's say that you want to apply for a loan. You know that you can pay the money back, you have a history of making payments on time, and you've planned everything down to the letter. There's only one problem: you don't have a great credit score. To your local bank, that might not be a problem. Granted, your credit score will still matter, but it won't carry quite as much weight as it would with a megabank.
Local bank workers have the time and the means to consider factors besides your credit score. They might consider, for instance, a young applicant who hasn't had the time to build credit but has always paid their rent on time. Megabank workers, on the other hand, aren't generally equipped to see people as people. They see credit scores first, which doesn't bode well for many loan seekers.
If you have a low credit score and can't offer much collateral, your chances of getting a loan become slim. If you're lucky enough to get a loan, then you'll deal with high interest rates.
Struggles for "Risky" Businesses
Megabanks don't just make personal loans difficult. They also make loans tough for business owners. For bankers, some businesses are riskier than others. Bankers hesitate to approve loans for people in the restaurant industry and the hospitality industry. But what if your town has the perfect environment for a hospitality-based business? What if the restaurant industry thrives in your community?
That won't matter to a megabank owner. These bankers don't know your community the way that a local banker would. They have no way of knowing which businesses can do well in your community. If you own or plan to start a "risky" industry business, then you'll find a higher chance of approval with a community bank.
For megabanks, the bottom line matters more than anything else. This means that they'll sneak in any way to make an extra buck. This is how multimillionaires get richer while poor people stay poor. At megabanks, you'll deal with hidden fees, maintenance fees, and penalties for funds that slip below the minimum requirements.
Don't Give More of Your Money to Amazon
Speaking of rich people getting richer, did you know that Amazon offers banking now? If you thought ordinary megabanks were bad, imagine the type of damage that Amazon banking can cause. For one thing, Amazon already stamps out local businesses on a regular basis. Adding banking to the mix can only lead to more "going out of business" signs and economic disparities.
Plus, the security concerns are endless. Obviously, hackers are going to target Amazon bank accounts, but imagine adding Alexa into the mix. We already know that Amazon spies on our conversations at home. Does Alexa really need to know our account balances, too?
Local banks may be our last line of defense against a complete Amazon takeover.
What about Credit Unions?
So far, you've seen a few banking options:
- Put your money in a megabank
- Let Amazon control your money
- Use a community bank
So far, the third option shows the most promise in terms of savings and safety, but are there any other choices? There is one: banking with a credit union. Credit unions offer the same services as banks. You can open accounts, apply for loans, use a debit card, and do all of the other things that you'd do while using a bank.
There are a few key differences, though: ownership, nonprofit status, and community structure.
A bank has one owner or a few owners, but credit unions are owned by their members. When you open an account with a credit union, you actually buy a small portion of that credit union and become a part owner.
Banks are businesses. Megabanks are mega businesses, and local banks are small to medium-sized businesses. Credit unions are nonprofit organizations. Any money that they make goes right back into the organization. Because credit unions don't try to make a profit, they can often offer great interest rates and many of the other financial incentives that community banks offer.
Credit unions don't have customers; They have members. Who gets to be a member? It depends on the credit union. Some credit unions serve a particular state or region. Others serve people in particular professions, such as education or the arts. Some credit unions are just for military members. Credit unions absolutely support their communities, much like local banks do. However, in the case of local banks, "community" always refers to people within a geographical area. Credit unions support various kinds of communities.
How to Find the Right Bank
Whether you choose a local bank or credit union, how do you find the right one? You'll want a financial institution that can fit your needs and make your life easier. You have a lot of choices, so which one fits the bill? You can make the process easier for yourself by taking a few steps upfront.
Skip the Megabanks
First, cross any megabanks off your list. Not only will they not help your community, they may actively harm it by preventing local businesses from getting the support that they need. For that matter, megabanks will leave you more vulnerable to security breaches, hidden fees, and other risks.
Think About Your Banking Needs
Now, why do you need a new bank? Do you need a new checking or savings account? An auto loan? Whatever your reasons, think about them as you search for a new bank. Keep them at the top of your priorities list. They'll help guide your choices as you compare and contrast your options. For example, if your savings account is your biggest priority right now, then you might choose the bank or credit union that can give you the best interest rates.
Compare Side by Side with Bundlefi
Finally, use Bundlefi to compare and contrast your banking options. Bundlefi is dedicated to connecting people to community banks and credit unions, helping them find the financial institutions that do the most good. Bundlefi lets you compare your options side by side and search based on your banking needs. When you see your options in the same place, your search for the right bank gets easier. Take a look at Bundlefi today to get started. Whether you choose a local bank or a credit union, you deserve to get the most from your money.