The easiest thing you can do to put your savings to work locally is to bank local with a local community bank or credit union. These smaller establishments, typically with less than $1 billion in assets, are the last vestige of the old-fashioned relationship-based banking system—think George Bailey’s Building & Loan. Their primary business is making loans to local families and firms, so the money you deposit with these institutions is much more likely to support your local economy, rather than being fueling speculative bubbles or complex derivatives. Small banks also tend to offer lower and fewer fees, as well as better interest rates on their products than large banks, according to research from the Pew Charitable Trusts and others.
True community-scale banks have been in decline as the banking world has consolidated. (The market share of the top four banks increased from 6% of industry assets in 1984 to 44% in 2011). But they do exist. And, despite their smaller market share, community banks represent a disproportionate share of small business lending.
“A community with a local bank can better control its destiny.”
Credit Unions are another excellent option. They are a form of cooperative—member-owned not-for-profits that distribute excess revenue back to members in the form of better rates and lower fees.
Community banks and credit unions typically off a full range of services, including checking and savings accounts, ATM network access, credit cards, mortgages and consumer and commercial loans.
A Move Your Money campaign sprung up in the wake of the financial crisis, sparked by outrage and mistrust of big banks and their handling of the mortgage crisis. But there’s a broader motive. As Thomas Hoenig, vice chairman of the FDIC and former head of the Kansas City Federal Reserve put it: “A community with a local bank can better control its destiny.”
- Community banks are FDIC-insured
- Community banks and credit unions offer a wide range of financial products and services, from savings and checking accounts, CDs to credit cards and mortgage loans
- They typically offer higher interest rates on savings and checking accounts and lower fees than large banks, as well as better rates and fewer fees on credit card and loan products
- Because they lend to individuals and companies in the area, your deposits are invested back into your community
- Smaller banks and credit unions may have limited ATM networks, although this is not always the case
- Small banks do not have the deep balance sheets and access to cheap capital that big banks have, and many are struggling in the wake of the financial crisis
The Credit Union National Association (CUNA) has a website for consumers, www.creditunion.coop, that offers a credit union locator and other helpful info. Many credit unions also offer “switch kits” to making switching your bank account easier.
The Independent Community Bankers of America (ICBA) offers a similar tool to find a community bank near you at http://www.icba.org/consumer/BankLocator.cfm
The Institute for Local Self Reliance is an excellent source of information about the banking industry and the advantages of community banks and credit unions: http://ilsr.org/initiatives/banking/ It also offers a handy checklist to help with switching banks.
Small Matters has a great site that assesses your bank’s impact on the community: http://banklocal.info/
The Center for Responsible Lending is another good resource for consumer banking and loan information, including a shopper’s guide to better banking.