Personal Finance

Benefits of Small Local Banks vs. Big Banks

There are tons of banking options these days: small banks, large banks, online banks, credit unions. Here’s what to consider as you shop around for the best bank for you.

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In the market for a new bank account? How do you find the best bank for your needs?

In general, banks fall into one of two categories: large national chains and smaller, local or regional banks. Both offer similar services: checking and savings accounts and lending, among other things. However, there can be major differences in how they offer those services.

If you’re trying to decide between opening an account with a local bank or a larger one, here are some things to consider.

Benefits of Local Banks

Local banks tend to be smaller, focusing on just a small region or maybe a state or two. National banks, by contrast, often have branches in almost every state in the U.S. Below is a list of why local banks are appealing to customers.

Competitive Interest Rates and Fees

One thing that many, but not all, smaller banks excel at is keeping their interest rates and fees competitive. Smaller banks know that they’re competing against some of the largest financial institutions in the world. Making their accounts cheap and offering high-interest rates is one way they can draw customers.

Look for accounts with no monthly fees and interest rates higher than average.

Of course, some smaller banks will go in the opposite direction, offering worse rates and charging higher fees to try to boost income, but in general local banks are usually a better deal financially than large banks.

Community Focused

Smaller banks usually have a more community feel and are more in touch with the needs of your community. Larger, national banks don’t have the time or ability to get to know every community they exist in.

That means that local banks are usually better able to address needs unique to the areas they’re operating in. For example, if you live in a vacation community that has a big economic surge in the summer when travelers come to visit but with lulls in the winter, a local bank will be better equipped to handle customers who work largely seasonal jobs.

Smaller banks are also more likely to get involved with local charity groups and events, which can be appealing to many potential customers.

Personalized Service

Large banks can have millions of accounts under their management. If you open an account with a large chain, you’ll just be another face in the crowd.

By contrast, local banks are usually able to provide personalized service. As you work with your local bank, you’ll get to know the tellers and other employees there and they’ll get to know you. The bank staff will be familiar with your needs and be better equipped to offer advice and recommendations.

Local banks also tend to be more flexible when it comes to things like approving loans or helping out long-time customers. If you hit a rough patch but have been a long-term customer of a local bank, you might have more luck with getting a loan than you would with a national bank, which tends to have stricter rules for such things.

Of course, if you live in a small town, you might prefer the anonymity of a large bank, which is worth keeping in mind.

Benefits of Big Banks

But there’s also a list of reasons to consider larger banks if you’re in the market for a new bank account.

National Reach

One of the obvious perks of a national bank chain is its national reach. If you work with a local bank, you likely won’t be able to find a branch or ATM if you travel outside of that region. That means if you go on vacation, you might wind up paying fees to use other banks’ ATMs. If you move out of town or out of state, you also might have to move to a new bank.

With a national bank, you’ll have ATMs and branches to use almost anywhere you go, which can be convenient for people who travel a lot.

More Options

Larger banks often have more options when it comes to the accounts you can open or the services they provide.

A local bank may have just one or two checking accounts and savings accounts or may offer one-size-fits-all mortgages and other loans.

With a large bank, you’ll likely be able to choose from many different accounts. This can be especially important when it comes to lending services. A lender that offers 30-year mortgages, 15-year mortgages, and adjustable-rate mortgages with a variety of different terms has a clear advantage over a local bank that only offers 30-year loans.

Better Technology

Larger banks have more money to spend on developing their online and mobile banking applications. Local banks often have to build their apps and websites on a small budget or need to use a pre-built system that they add small customizations to.

If a good online and mobile banking experience is important to you, you’ll probably be happier with a larger bank.

Learn More: Top 10 Largest Banks in the World

What to Look for When Comparing Banks

Whether you’re looking for a bank account from a national chain or a local bank with just one branch, these are the things you should look out for.


The most important aspect of a bank is its convenience. You want to be able to access your money quickly and easily, whether that means walking into a branch to make a withdrawal, visiting an ATM, or making an online transfer.

You also want basic, essential tasks, like transferring money between accounts and paying your bills to be as easy as possible. Make sure that any bank you choose has branches and ATMs in the areas you frequent and has a functional online platform.

Related: How to Send Money to Friends and Family for Free


A bank should be a place to keep your money safe. Still, many banks charge monthly fees that eat away at your account balance. You can usually avoid these fees if you’re willing to jump through hoops, such as by meeting minimum balance requirements, but sometimes the requirements can be difficult to meet.

Look for banks that offer fee-free accounts. If you must choose an account that charges a fee, make sure it’s one you can easily avoid. Sometimes this can be done by simply setting up a recurring direct deposit and/or maintaining a low minimum balance.

Related: Best Banks With No Overdraft Fees


It can be annoying to have to work with multiple banks if you want to get multiple services, such as deposit accounts and loans. When picking a bank, try to choose one that offers all of the financial services and features you expect to need.

Credit Unions

One alternative to smaller, local banks that people should consider is a credit union. Credit unions function a lot like banks with a couple of essential differences.

First, you can only open an account with a credit union if you meet certain membership requirements. Some are easy to join, such as making all prospective members make a $5 donation to charity. Some are more restrictive, only available to employees of a certain business or residents of a single town.

Second, credit unions are owned by the people who have accounts at the credit union rather than shareholders. This means they have to operate in the best interest of their customers because the customers own the business.

If you like the idea of a small, community bank, credit unions are a great choice as they are designed to have a strong focus on community.

Online Banks

Online banks tend to function much like larger, national bank chains, with the main difference being that they don’t have physical locations. You won’t get the personalized service of a local bank, but online banks tend to have top-end online and mobile banking platforms and national ATM chains, making them ideal for tech-savvy people who want to work with a big bank.

Bottom Line

Both large and small banks have benefits, so it can be hard to choose between the two. Think about the things that you’re looking for from a bank and that can help guide your decision.

Whichever you choose, make sure that your bank account comes with low or no monthly fees and makes it easy to access your money. The last thing you want is a bank that slowly siphons money out of your account or that makes it hard to use your hard-earned cash.

TJ Porter

TJ Porter

TJ is a Boston-based freelance writer who specializes in credit, credit cards and bank accounts. In his spare time, he enjoys reading, writing, cooking, playing games (of the video and board varieties), soccer, and ultimate frisbee. You can find his work on his website,

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