5 Ways Community Banks and Credit Unions Can Help the Economy

Author: BankFeeInsider.com     Friday, August 22, 2014 12:00 AM

Common belief is that it is best bank with a large national chain. These large corporations make it easy to believe that bigger is better when it comes to banking and taking out loans. However, that is not necessarily the case. Smaller community banks and credit unions provide many benefits for customers, as well as small business owners. They also benefit the economic conditions within a community.

1) Lower Costs

Many community banks and credit unions offer the same or similar services as a national bank such as online banking, online bill pay, online check depositing and credit lines. However, the fees and charges are lower than those at a national bank. Additionally, interest rates on loans are noticeably lower. Lower and interest rates and fees make banking more economical for customers.

2) Helps Small Businesses

Small businesses within a community are important, as they create additional jobs for residents. Many small business owners rely heavily on smaller and local banks. If fact, small and medium-sized banks control over half of the lending for small businesses. This is primarily because of the lower charges and interest rates. National banks do not typically lend many resources to small business owners. Their primary focus is the big money businesses. Because community banks and credit unions support small businesses within the community, the local economy is bolstered.

3) Community Support

The funds of a community bank and credit union are aligned with the funds within the local community. In fact, when the community thrives, these community banks and credit unions thrive, which is why they are so active within the community. National banks are not obligated to support a particular community since they have many national locations.

4) Productive Investments

Some of the national banking institutes allocate a lot of their resources to trading that potentially brings heavy profit to the bank itself. While many national banks have profited from this method, it could jeopardize the financial system if the investment falls through. On the other hand, most community banks and credit unions use deposits and other resources to loans and additional beneficial investments. This has more social and economic value.

5) No Bail-Out Money

Community banks and credit unions are much less likely to receive bailout money than a larger corporation. As mentioned before, the cash flow is generated within the bank, thus if managed properly, there is no need to request a government bailout.

Source: BFI