Deciding where you should keep your money can be an important decision. Placing and storing your money at different types of financial institutions can affect whether you earn interest on your savings, if your money is safe and insured, and the kinds of financial products you have access to.
Both small and big banks have unique advantages and disadvantages, and there’s no single answer that would be true for each and every customer. That’s why it makes sense to break down the pros and cons of each type of banking institution in order to figure out how you can benefit from each particular setup.
If you’re wondering where to keep your money safe and weighing the pros and cons of big vs small banks, here’s everything you need to know about choosing the right bank account for you.
From savings and checking accounts to getting the best financial products and lowest mortgage rates, consider the benefits of each type of bank before making a decision.
Best Places To Keep Your Money: Small vs Big Banks
Most people use bank accounts for managing their ongoing balance of funds, but will also open a savings account in their primary bank to stash their extra cash. While changing banks is possible, it can be associated with lengthy administrative procedures or separation fees, which can complicate the situation.
Add in the annoyance of wasting your time and dealing with a process you can avoid if you make the right choice the first time around.
Knowing this, it’s very important to choose the right banking institution that can adequately cater to all of your needs.
The first question you need to ask in the decision-making process is whether to trust your money in a big bank or to go with a smaller local bank. Depending on the answer, you can proceed to create a shortlist of potential candidates to find the best one for you.
Large national banks include companies like JPMorgan Chase, Wells Fargo, Citibank, Bank of America, US Bancorp, Bank of New York Mellon, and the like. Small local banks like credit unions include most community banks and companies that only have a presence in your specific region or city.
Let’s compare the advantages and disadvantages of small banks like credit unions versus traditional national banks.
Big National Banks
The largest financial institutions are characterized by unmatched security, which is a top priority for many people. Their size and wealth make it almost impossible for them to default on their liabilities, so the deposits and savings are extremely unlikely to be in danger, regardless of how the bank fares in the market. This can’t be said for smaller financial institutions, which can become stretched to the breaking point if they make one risky decision too many.
Larger banks are also known for more competitive loan offers, since they have enough accumulated capital to have a vested interest in sending out as much of it as possible.
Another advantage unique to top banking brands is the ability to provide more comprehensive customer support and to be quicker to adopt new technologies that simplify personal money management (i.e. banking apps).
The largest banks in the country also face the highest regulatory oversight. While this might make them less consumer-friendly in terms of not being able to offer you as many services, a national bank is generally “too big to fail” and that protects your money.
Overall, it can be said that large banks are a slightly safer choice that could turn out to be financially prudent as well if you need continued access to advanced financial products and ongoing technical support.
Small Local Banks
Smaller banks can typically provide much more affordable service, since their overhead is much lower than major banks.
For example, Chase’s and Wells Fargo’s checking account fees are probably higher than at your local bank, so people with simple banking needs can take advantage of the lower fees without a significant difference in terms of quality of service.
In addition to being budget-friendly, smaller banks are rarely crowded and are therefore able to create a more pleasant atmosphere with a personal touch. Combined with shorter lines at the counter, smaller financial institutions handle less business and are often capable of processing client’s requests on an urgent basis.
In some locations, it’s not rare for bank managers to directly interact with long-term clients and hear about their priorities, which creates a level of trust that’s hard to replicate in a true corporate setting.
Taken together, these advantages allow smaller banks to keep their clients for a long time and treat them almost like family members.
Compare Large vs Small Banks
As stated already, banks of different size appeal to different types of customers. Some highly-demanding customers are more likely to be swayed by the security, professionalism, and technological excellence that the leading banks are able to provide.
On the other hand, people who mostly use their banking accounts to deposit and withdraw cash tend to lean towards the affordability and simplicity of the smaller banks. In other words, paying higher Wells Fargo checking account fees might be okay for some customers, but a deal-breaker for others.
This trend is reflected in the style of advertising that various banks use, which target a segment of the population whose needs are best aligned with their advantages. The diversity of the offers is the factor that permits both types of organizations to exist alongside each other.
For instance, in many big cities, it’s perfectly normal to have a branch of a large international bank just down the street from a locally-owned banking establishment.
Where You Should Put Your Money
Before you choose your bank, you need to assess your financial plans for the future — up to five years — and decide which benefits are most important to you – for some people, financial savings are paramount while others may care more about the level of service.
Completing this preparatory step will allow you to approach the selection process with a clear mind, and to compare the offers within the context of your needs. You should still visit a few banks and ask them to explain the conditions they are offering for the type of service you need.
By doing this, you will get a better feel for each option, so the decision will come as the natural product of a strategic procedure.
Of course, changing banks is not impossible so it’s not the end of the world even if you don’t get it right on the first try. As long as you recognize your mistake quickly and switch to a more favorable option, keeping your money at one bank or another won’t cost you much.
There are trustworthy banks in all size classes, and you’ll probably be able to find one that’s perfect for you if you’re aware of your red flags and preferences.