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How to Decide: Community Banks, Credit Unions or Megabanks

Whether you want to start a savings account or you need to take out a loan for a new car, you have to make a banking choice. Do you choose a local bank or credit union, or do you go with a megabank? If you are thinking that bigger is always better, this is not the case when discussing your banking needs. In fact, according to the 2015 Consumer Banking Insights study, 66 percent of people would choose a local bank or credit union before depending on a megabank. As you decide which type of banking institute will best serve your financial interests, consider the biggest differences between banking types—fees and customer service.

Lower Fees Count

If you want to go with a banking institution that offers the lowest fees, such as service charges, ATM fees, and check purchasing, avoid megabanks. Consumer Reports states that, “You’re more likely to find lower fees and better rates at community banks, larger credit unions, and online institutions.” Part of this is because megabanks simply charge so many types of fees.

From mounds of paperwork with fees in fine print to disclaimers allowing these banks to add and increase fees as they see fit, fees quickly add up. There are fees for closing accounts earlier than permitted, and some megabanks even charge a monthly fee to use a debit card. Some megabanks including will even charge you money to close an account; US Bank charges account holders a $25 fee.

With megabanks fees are tacked on when you least expect it, and often when these banks need to increase financial holdings. As these banks lose your money in speculative trading, they attempt to make up for lost investments with an increase in fines from customers. Community banks and credit unions, on the other hand, offer simplistic fee schedules, and in most instances fees are nonexistent. These types of local institutes simply don’t need to trick customers into paying fees.

Furthermore, while a $5 charge a month per debit card holder at a megabank will generate a lot of revenue for the bank, local banks have a much smaller customer base. These types of fines just aren’t worth it for local banks and credit unions. Instead, local banking institutes are more interested in helping customers gain financial security, rather than making money off of their wealth.

Time to Get Personal

When is the last time you called a megabank and talked to an actual human without dialing an extension? How about calling a megabank and talking to someone who lives in your home state, or even the US? When it comes to customer service issues, such as a discrepancy with your bank statement or a stolen debit card, you want to talk to someone, a real person. The last thing you want to do is deal with voice prompts and non-native speakers who aren’t sure where to direct your call.

Better yet, you want to be able to walk into a bank or credit union and talk to a person who can help you, face to face. This offers the best results as information is not lost in translation over the phone or via computer messaging. More importantly, you want to know that the person who is assisting you is actually interested in helping solve your banking problem.

With a community bank or a credit union, chances are you know the person who is helping you outside of the banking world. They may have graduated high school with you, or you might know their mother from a library book club group. Even if you don’t know the person, you are more likely to trust them simply because you can exchange information with them on a personal level. That is the key, the personal touch, and it is why most people prefer local banking institutes.

Bottom Line in Banking

Lower fees and personalized customer service are the top reasons why bank customers opt for local banks and credit unions. Another issue to consider is bank branch accessibility, such as being able to find a local bank branch for making cash deposits. You also want to find a community bank that offers services suitable for your banking needs, such as retirement accounts, college funds, mortgages, or savings accounts. After all, a bank or credit union is only as useful as its services. By choosing a full-service, community banking institute you are able to grow financially without having to bank-shop in the future.