A common question is often asked of local banks like ours: What’s the difference between a local and national bank?
We clearly are a little biased but we can tell you the pros and cons as we see them.
Advantages of Local Banks
Better rates on checking and savings accounts. With more money, size, and power, one might think larger banks are better positioned to offer better rates. On average, however, smaller banks offer rates on savings and checking accounts that are 50 percent higher than their larger counterparts.
Transaction timelines tailored to your need. National banks often perform transactions on their own timelines while smaller local banks are often able to more flexible to the customer’s schedule. For example, if you run a seasonal business, you can likely adjust your mortgage payments to match when you are making money working with a local bank.
Lower transactional costs. Bigger national banks often have greater transactional costs on certain products in order to cover their large administrative costs. Often you are not only paying for the actual costs of the product’s transaction, but also the salary of executives and other management. Pay attention to costs on transactions you do frequently for a fair comparison.
Less risky loans. While national banks may have more-recognizable brands, it may actually be the smaller local banks that are more trustworthy. The larger banks have statistically given out more bad loans than smaller banks. Simply put, local banks are more careful, likely because they know the person borrowing!
Security in banks knowing who you are. Someone can’t impersonate you as easily at a smaller bank where people know you by face as well as name. It would take a very vigilant teller to recognize an identity thief at a larger bank where they may have never seen you before.
Personable interactions. Do you value knowing the employees at your bank on a more personal level? Whether it be talking about local sports, the weather, or something else, there is more chance for small-talk or real meaningful conversation at a local bank.
Local banks know the local market. Whether you are refinancing a home or starting a small business, local banks are better positioned than national banks to understand the local market. As such, a local bank is better positioned to provide loans with terms that will help you succeed in the local market.
Smaller banks put money back into the community. You can actually help stimulate the local economy simply by banking locally. This is because local banks invest more in small local businesses than national banks.
This is a helpful tool to find banks that invest in their local community: https://banklocal.info/map/locations/68701-chicago-il-usa-5_0
Advantages of National Banks
More locations. Perhaps the biggest advantage of a big national bank is having locations seemingly everywhere. You could be travelling hours away and easily stroll into a branch of your bank. Or maybe you live seasonally between two states and have a branch nearby you in both locations. Whatever your situation may be, it is handy to have a branch of your bank nearby.
International travel and transactions. Among the banks rated highest for international travel and transactions are big national banks . Advantages may include no international debit fee when using an ATM or low wire costs between international accounts.
Technology in banking. National banks usually offer the latest technology as far as banking apps for your phone, online banking, and customer service (such as 24-hour automated service to answer you questions). Some community banks have the latest technology as well–but it is not something that is a given.
Around the clock service. Better than a chatbot or automated customer service option, national banks sometimes have 24-hour customer service hotlines with live service agents available to answer your questions at any time of day or night. Conversely, local community banks may only have someone answering the phone during regular banking hours or use a third party service during off hours.
We get it, banking is a personal decision. And whether you decide to work with us or someone else, it’s important to learn as much as possible and pick a company you trust. Regardless of national or local, banks are an important tool in reaching your short and long term financial goals. We love being your local Chicago bank!