When it comes to banking, there are many options including credit unions, online banking institutions, small banks, and large national chain banks. The latter in the past 10 years have received negative press including a nationwide protest on Nov. 5, 2011, called "Bank Transfer Day" where dissatisfied big bank customers were encouraged to switch to credit unions and smaller, more personal banks.
Among the reasons, customers leave the big banks are increased debit card fees, lack of individualized customer service, and general dissatisfaction. However, there are amenities big banks offer that may not be available at smaller financial institutions.
- Big banks may seem impersonal, but there are benefits to using national chain banks.
- Credit unions and smaller banks may have limited ATM and branch access compared with a national bank, like Citibank or Chase.
- Big banks may charge more fees than smaller banks, however.
- In 2011, banking customers held a nationwide protest called "Bank Transfer Day," but it has yet to be repeated.
- Big banks may offer their customers more interactive, online tools than smaller banks.
Advantages of Big Banks
Here are four reasons to keep in mind when considering your banking options. You can also learn some drawbacks of banking with large chain banks as well as other alternatives that may be more suitable for you, depending on your needs and goals
Big Banks Aren't Necessarily Impersonal
Katerina Taylor, an experienced banker and a financial literacy educator with Smart Kidz Money Matters, says that small banks try to leverage the idea that because of their size, they deliver intimate community customer service to their clients. But this idea is not a fact.
"Every bank regardless of size can offer a hometown community client experience. Many big banks and regional banks employ people right from their particular communities. Your big bank teller or personal banker might go to church with the local pastor, see their former principal in the grocery store or have kids that play on the same baseball team," she says.
In other words, you shouldn't assume that you'll get more personal service at a small bank, or less personal service at a big bank.
Vast ATM Networks and Ubiquitous Branch Locations
When you visit your own bank's ATM, you won't pay a fee for withdrawing money, and the big banks have lots of ATMs. These ATMs are not just at the banks themselves, but also in popular retail locations like grocery stores, convenience stores, and mass merchandisers.
For example, Bank of America has approximately 17,000 ATMs, while Chase boasts 15,500 ATMs, and Wells Fargo claims 13,000 ATMs. Among the big banks, Citibank tops the list with 65,000, according to its website.
If you use ATMs frequently, it makes sense to have a checking account that makes it easy to avoid ATM fees, so using a big bank with a major presence in your area might be the best choice. If you do any of your banking in person, however, and you want the flexibility to visit a teller even if you're traveling outside of your home city or state, you'll probably want to belong to a bank with numerous branch locations. Chase has over 4,700 branches and Wells Fargo has 7,200, according to the companies' websites.
Banking is a personal choice and shopping around for the best rates and low-fee offers may help you find the right bank or credit union for your situation.
Big Banks May Simplify Banking Abroad
If you frequently travel abroad or have an international vacation coming up, an account with a major bank could save you money. "Some big banks and regional banks have developed a relationship with independent ATM retailers so that even if their clients use the ATM machine there is no cost," says Taylor.
Bank of America customers can use their ATM cards with no fees at banks in the Global ATM Alliance. The alliance includes BNP Paribas (France), BNL d'Italia (Italy), Barclay's (England), Deutsche Bank (Germany), Westpac (Australia and New Zealand), and Scotiabank (Canada and the Caribbean).
Citibank customers can make fee-free withdrawals in over 20 countries at a Citibank ATM, or at MoneyPass ATMs. On the other hand, Wells Fargo and Chase customers pay a $5 fee to withdraw cash at an ATM outside of the United States.
Big Banks May Benefit Commerical Business
Some business customers might find that big banks meet their needs better than small banks.
"I believe my company is an excellent example of how the big banks have actually helped our business," says Derek Capo, former CEO of a now-defunct (as of 2007, according to LinkedIn) language-immersion program company Next Step China,
"We started our business back in the thick of the financial crisis and Bank of America bent over backward to make sure they made us happy. They have waived hundreds of dollars in fees and we have saved money because of their Global ATM Alliance as we can take out money in China with no ATM fees," he says.
Capo says Bank of America's advice helped his company set up its accounts and avoid a fraudulent check problem. "I really think that for small business the big banks are okay," Capo says. "No small, medium, or even larger bank could have done what Bank of America did for us. Maybe we are the exception, but I don't think we are special," he adds.
Some Cons of Big Banks
There are downsides to big banks. In some cases, larger financial institutions may offer less competitive rates on loans and charge larger fees than community banks or small credit unions. If you take out a loan with a big bank, it might take longer to process, too.
Big banks may be reluctant to lend money to low-income or middle-income borrowers with less than stellar credit, as well.
Alternatives to Big Banks
Big banks aren't necessarily bad, and small banks and credit unions aren't necessarily a better alternative. Each person has unique banking needs, like easy access to in-person service, a vast network of global ATMs, or simply knowing everyone by name at your branch. Evaluate the merits and shortcomings of the available options to find the best fit.
If you are on a budget or a low-income earner, a credit union might be able to offer you better loan terms, no-fee banking, and more personalized service. There are also specialized credit unions designed to support specific groups, like teachers, military members and their families, and government employees. These specialized credit unions often offer benefits that you can't find in a large national bank.
For some, it might even make sense to have accounts at multiple banks to meet various needs. For example, if your local credit union offers a no-fee, no minimum deposit checking account, but your larger bank offers a better APR on your home loan, you might divide your banking between two institutions.
Banking at a credit union may come with benefits that are not offered at national banks. In addition, credit unions may be more flexible when it comes to loans.
The Bottom Line
Big banks can provide convenience, a wide variety of services from investment accounts to mortgage loans, and more access to ATMs, even abroad. However, larger banks may mean less personalized customer service, higher fees, and not be committed to your specific community in the ways that smaller, local banks and regional credit unions are.
Ultimately, your reason for choosing a bank should not be based on its size but on the compatibility of its services and features with your banking needs.