Community Banks vs Mega Banks: What\'s the Difference?

Author: BankFeeInsider.com     Sunday, August 17, 2014 12:00 AM

A recent Harris Poll of over 1,000 American adults over the age of 18 revealed some interesting statistics about banking preferences and behaviors. According to the study, most Americans prefer working with a financial institution they can trust and establish a long standing relationship. They also look for an institution that offers quality services with few transaction fees.

The study revealed that 43% of current megabank customers were dissatisfied with their banks, while 46% reported a lack of loyalty toward their institution. In contrast, 93% of those who used community banking stated they trusted their local bank, with 84% feeling very loyal towards their financial institution. Half of the consumers polled stated that they believed local banking was important to them as an investment into their local communities.

Advantages of Local Community Banking

Community banking has its definite advantages, especially for local residents who are looking for a bank they can work well with while investing in their local communities. The following lists some of the major advantages local banks have over their megabank counterparts.

Community banks strive to meet the needs of their local community members. As such, bank loans and services will be geared to benefit depositors who work and live in their area in order to contribute to local business growth and prosperity. Bank officers are usually involved in local affairs and are constantly on the lookout for ways to support the community they serve. In contrast, megabanks tend to favor large businesses and corporations over the needs of the average consumer. Megabank headquarters are generally far removed from the community, with officers having little interaction with local dealings.

When it comes to loan approvals, community banks tend to be flexible in their loan qualifications, taking into consideration a person’s family history, spending habits and character. Loans may be approved faster due to decisions being made on a local level. As a small business, community banks understand the importance of supporting their small business and farm community. Megabank loan qualifications are often more restrictive, with the main focus being a person’s current financial standing and credit rating rather than taking into account personal circumstances. As approvals are often decided out of state, borrowers may be subjected to a long, time consuming process.

Community banks are safe financial institutions, with deposits being backed by the Federal Deposit Insurance Corporation (FDIC). Banking services are open to all local residents, with no membership required. When you bank locally, you benefit from all the financial investments your institution makes into the local community in addition to lower transaction fees and higher interest rates on local deposits. Community banks and credit unions are known for having greater interest in meeting their customers’ needs and adhering to sound business practices. Their success relies on building solid relationships that have their customers’ best interests at heart. Working with a bank you can trust will make a marked difference in your financial future.

Source: BFI