What is the difference between a big bank and a local bank?
While big banks may offer plenty of branches and sprawling ATM networks, bigger isn't necessarily better in banking. Small banks can offer useful perks of their own, such as personalized service, better financial terms and support for their local communities.
Small banks may offer a more personalized customer experience, while big banks may be more comprehensive, offering an array of deposit accounts, loans, insurance, financial planning and wealth management. When choosing a bank, and understanding how different banks operate, size is only one consideration, however.
National banks have a broader presence, with branches across the country, offering convenience for customers who travel or relocate frequently. On the other hand, regional banks tend to focus on serving their local communities and fostering strong relationships with customers and businesses in their area.
Credit unions usually offer free checking accounts, whereas banks often charge a monthly fee unless you maintain a certain balance. Best Reward Federal Credit Union Share Draft Checking has: No Monthly Service Fee. No Transaction Fees.
With a focus on relationship banking, community banks foster a sense of trust and loyalty among their clientele. On the other hand, big banks are national or multinational corporations with a vast network of branches and services.
Compared to megabanks, local institutions offer lower fees, more free accounts, relationship-based banking, and personalized products and services. When you're ready to make the switch to a local bank, you'll want to visit the credit unions and community banks in your neighborhood.
A big bank refers to a large financial institution that holds a significant amount of money. In the context of the video, it refers to banks that are recording the biggest profits and are getting richer despite the financial struggles of the general public.
Regional banks are bigger than community banks but smaller than national banks, with an asset range of $10 billion to $100 billion. Some local banks are limited to one community, while a regional bank can operate branches across a few states and have history in each community.
A local bank is defined as a depository institution of any size (large or small) that is locally owned and operated. Typically, local banks focus their offerings and efforts on the individuals and businesses that reside in the surrounding community.
Perhaps the largest difference between small banks and big banks is the range of financial products and services they can offer. Big banks are generally capable of offering a larger variety compared to smaller, local banks, which may tailor their offerings to the population they serve.
What is the main disadvantage of a big bank?
One downside of relying on a large bank for financial planning, investing, or special transactions is the potential lack of personalized attention and tailored advice.
Thanks to FDIC insurance, they are just as safe as larger competitors.
Local banks are often better suited to meet your needs with more personalized and friendly service while keeping costs low and interest rates high. By choosing a local bank, you're not just getting personalized service and potentially better rates—you're also investing in your community's future.
- Lending and deposit gathering within a limited geographic area.
- Relationship lending, which relies on specialized knowledge gained through long-term business relationships.
Large banks have lower equity, easier access to capital markets, more business loans, lower interest rate spreads, higher salaries, more non-interest income, more diversification, and more aggressive management. Smaller banks tend to operate in less competitive markets and are more conservatively managed.
One area where community banks tend to be at a disadvantage is flexibility. Without a large network of bank branches and ATMs, customers have a harder time banking if they own a business with interstate operations or if they plan to move to another part of the country.
Big banks are often tied to a stricter loan policy, applying impersonal qualification criteria to all loan decisions without regard to individual circumstances. Community bankers offer nimble decision-making on business loans because decisions are made locally.
Community banks offer many of the same traditional banking services as national chains, but often with more competitive rates and fees. Because community banks are smaller than larger institutions, business banking generally costs less, leading to fewer fees and better interest rates.
Credit unions tend to offer lower rates and fees as well as more personalized customer service. However, banks may offer more variety in loans and other financial products and may have larger networks that can make banking more convenient.
1. JPMorgan Chase – $3.5 trillion. Columbus, Ohio-based JPMorgan Chase is the largest US bank with total assets of $3.503 trillion. Some $2.684 trillion are domestic assets, accounting for 77% of its total assets.
What is the difference between a local bank and a community bank?
Generally speaking, a community bank (also known as a local bank or regional bank) is a smaller bank that serves a specific community or geographic area. Although there's no official definition for a community bank, the FDIC defines community banking organizations as those with $10 billion or less in assets.
BANK | FORBES ADVISOR RATING | LEARN MORE |
---|---|---|
Chase Bank | 5.0 | Learn More Read Our Full Review |
Bank of America | 4.2 | |
Wells Fargo Bank | 4.0 | Learn More Read Our Full Review |
Citi® | 4.0 |
Beyond their typically smaller size, community banks are defined by their focus on the geographic area, or community, they call home. In contrast to larger financial institutions, the money you keep with a community bank remains in that community.
Regional banks may charge lower average fees for services like account maintenance, ATM usage, and overdrafts compared to national banks. The impact of lower fees at regional banks can be particularly significant for consumers who maintain lower account balances or require more specialized banking services.
Choosing a regional bank gives you the benefits of both large and small institutions. They have the infrastructure to offer digital services, competitive rates, and access to nationwide ATMs. At the same time, they maintain a personal, community-focused approach that national banks may lack with strong cyber security.