Do You Need a Local Bank?

Posted by Brian on October 14, 2009

Do you need a traditional retail bank?

Until recently this might have been an odd question. Bank failures, government bailouts and increased fees are causing many people to stop and think about their choice of bank. In this day of direct deposit, ubiquitous ATM’s and increased competition some people are realizing that all of their banking needs can be met in other ways – often with better rates and lower fees!

Retail banks offer a variety of financial services, but the majority of people use them for checking and savings accounts. The #1 criteria for choosing a local bank is often convenience. People tend to give their business to the bank that is closest to where they live or work even though a better deal can be found elsewhere.

Where can a better deal be found? Two sound alternatives to retail banks are credit unions and online banks.

Credit Unions

Credit unions are similar to banks with one key difference: they are nonprofit, member-owned cooperatives. Credit unions return any profit to members, generally resulting in higher checking and savings account interest rates and lower fees than retail banks. Deposits are federally insured.

Credit unions may offer a more limited range of services than a retail bank. They may also provide restricted access to ATM’s and have branches that are less convenient to visit.

For more information about credit unions visit the Credit Union National Association.

Online Banks

Online banks are retail banks without branch locations. Eliminating the cost of operating local branches results in a savings to the bank that is usually passed along to customers in the form of lower fees and better interest rates. Paying bills or transferring funds is incredibly easy and efficient. Online banks are open 24/7 for your convenience. Deposits are federally insured.

Obtaining money from on online bank isn’t as easy as a retail bank. ATM cards are provided so you can withdraw cash, but ATM access may be restricted.

Two popular online banks are ING Direct and HSBC Direct. Other options can be found at The Best Bank for Your Money.

Where do You Bank?

Do you still bank at a traditional retail bank? Have you switched to one of these alternatives and love it? Are there other worthy bank alternatives not mentioned in this article?

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Comments to Do You Need a Local Bank?

  1. I think that the main thing people should be concerned about are fees. With online banks such as ING or HSBC, there usually aren’t any, while many checking accounts from traditional accounts have them.

    Also, it’s going to be hard to get a no-fee credit card soon, so my no-fee Bank of America checking account and credit card might soon cost me, so what I think is a great deal now might turn into something much worse than I imagined. I wonder where we’re going with this.

    Daniel @ Sweating The Big Stuff

  2. I am a BIG proponent of a local bank. In fact, I have 3 banks, so i can optimize my interest income, and minimize my expenses.

    Having a boutique local bank to cater to your needs is very valuable to me. It’s especially important if you have much more $250,000 in cash savings.

    Hope to see you over at FS!

    Financial Samurai

  3. I live a largely cash-less life and do 98% of my banking at ING. The ONLY reason I have a traditional bank is 1. I live in an apartment where you need quarters to do laundry and 2. for the occasional contribute one dollar at work thing.


  4. I’ve been using credit unions since 2000 and have been very happy. We moved to a different state a couple years ago and I didn’t see the need to switch banks since the CU we belonged to had great online service. However, we discovered that a local CU here had checking interest rates of 5% for the first $25,000 in your account if you made one direct deposit and 10 debit card purchases per month so we gladly switched. We have been very pleased even though they had to lower the rate 4% this month. That still beats any CDs out there.


  5. I find that a local bank for checking and an online bank for savings is a great way to go. You get the benefits of both.


  6. I couldn’t see myself using anything other than a credit union or an online bank, I love both. I use a local credit union as my main bank for local business such as loans and I use multiple online banks for more checking and savings options. The service and returns are so much better with credit unions and online that retail banks can’t even begin to compete. I did try a retail bank once, I ended up closing my account after 2 months because of fees and absurd requirements when compared to my credit union.


  7. I actually have an account at ING and HSBC, as well as a local bank. ING is simply the easiest to use web banking interface I’ve seen, and HSBC offers a better rate.

    I have small savings accounts at ING, like car insurance, life insurance, etc.. yearly premium type bills, and keep the emergency savings at HSBC.

    I have the local bank for convenience and because they offered the best deal on a mortgage. I’ve also found local banks to be more stable than the large, national banks.


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