You might think economies of scale and ongoing federal subsidies to the megabanks would mean they’d price services lower than community banks. Yet MoneyRate.com’s latest semi-annual survey found small banks (holding $5 billion or less in deposits) were far more likely to offer totally free personal checking accounts* than big banks (more than $10 billion in deposits). Thirty-one percent of small banks surveyed provide this benefit, compared to 17.5 percent of big banks. Mid-sized banks ($5 – $10 billion) fell in-between at 28 percent.
And among banks charging monthly checking fees, small and medium-sized banks charged far less — $11.50 compared to $15.15 at big banks. Ten banks and thrifts in each of 25 large U.S. metropolitan markets were included in the survey, conducted during July-August of 2015.
Using your bank card at a non-network ATM always comes with a fee these days, but the charge again varies with bank size. The big banks capture nearly 6 percent more in ATM fees than small banks from non-customers, and they charge account holders using out-of-network ATMs about 17 percent more for the service. Mid-sized banks again fell between.
You may find community banks offer unexpected value in this realm, too. Needham Bank (MA), one of just two we contacted for this story, not only offers free checking with no minimum balance, but also automatically reimburses customers for ATM fees charged by other banks! Vice President Eric Morse notes this is possible only because Needham is a mutual bank whose shareholders also are customers.
Despite the largest banks controlling more assets than ever before, the value and service smaller banks provide may be starting to pay off. According to Accenture Plc, community banks saw a 5-percent increase in account holders aged 18 to 34, while credit unions gained 3 percent. At the same time, large national and regional banking chains lost 16 percent of their millennial-age clients.
We asked for impressions on this trend from the community bank where we do business: First Security Bank in Bozeman, MT. “Customers appreciate the personal attention they find at community banks, even if [younger customers] choose to do most day-to-day transactions online,” said President Steve Wheeler. “The personal attention can’t be replaced.”
Of course, there are many other reasons to seek out community financial institutions rather than a megabank. You’ll likely receive more personal service, enable more loans to help local entrepreneurs and keep decision-making power rooted in your community. Bob Marino of BankLocal, an online tool that measures the local economic impact of U.S. banks, noted, “our data demonstrate that smaller banks and credit unions lend substantially more to small businesses. And when you bank locally, a much larger portion of your deposit is reinvested back into your community.”
* Many more banks offer free checking if a minimum balance is maintained. See the link below for a wide array of resources from other community banking advocates.
By Jeff Milchen, Co-director of the American Independent Business Alliance
See also: Partnering With Community Banks and Credit Unions to Boost Local Business (includes an array of resources on shifting to community financial institutions).
Help More Residents Choose Local CFIs in Your Community (Word format template)