There are two types of banks on the size spectrum, and of course everything in between. The large banks we hear about in TV advertising and national media are all of the banks I would consider to be the Big Banks. They are Citibank, JP Morgan/Chase, Bank of America, Wells Fargo, Compass and others. These banks are designed to serve large businesses and corporations with mega loans, large overnight deposits, mortgage servicing, large wire transfers, currency exchange and international deals to name a few.
Banking institutions at the other end of the spectrum are the community banks and credit unions. These smaller institutions are generally privately owned by an individual or group of investors from the community. Credit Unions are, in fact, a NON-PROFIT banking institution owned by its members and run by a board of directors elected by the share-holder members. Credit unions offer the same type of government insurance and protection through the federal NCUA as a bank has through the FDIC. Assets are just as safe in a credit union as in a bank, and regulation is just as tough.
The big difference I see relevant to the common customer is the level of service and expense to the individual account owner. Banks are in business to make a profit. I am an advocate of the non-profit credit unions for most individual banking. Credit unions generally offer lower loan interest rates and less expensive fees. They budget to make a net gain on their operations so that they have the resources to continue building, growing, and expanding, but the exorbitant and obscene profits gained by Big Banks are not desirable to a credit union and would eventually need to be returned to the shareholder members as dividends.
In recent years, the larger community credit unions have caught up with the banks in their service offerings to include accessible and free ATM’s, low cost credit and debit cards, on-line bill-pay, transfers, and mobile deposits. Many even offer excellent service and loans to small business accounts. Loan rates for credit cards, auto loans and lines of credit are almost always less at a credit union. Interest paid on deposits is almost always more. If you insist on a bank, consider a locally owned bank so that profits and assets remain in the community and competition will keep the costs for the consumer at a reasonable level.
For the individual private banking consumer, it would rarely make sense to me to use one of the major banks for a checking and savings account, auto loan or personal signature loan. The same services are available through a credit union for less expense and much more personal service. I know my banker at my credit union and feel comfortable any time just walking in with a question. It sure makes life easier when I have an issue or a need that requires an understanding banker.
Give this some thought before you make your next banking change.
Paraclete Ventures LLC serves Daily Money Management clients in Arlington, Mansfield and Tarrant County, Texas. Click on one of the menu items above for more information about us and our services.