Why Community Banks Are Better Than Megabanks


Community banks prioritize local customers and make an impactful statement about who matters in their communities. While megabanks may use impersonal criteria when qualifying applicants for loans, community bank officers may consider customer relationships when making certain decisions.

Community banks reinvest in their local economy by making loans designed to boost it, so learn more about its unique benefits below:

Friendlier Customer Service

Customer service is of utmost importance, and community banks take this issue very seriously. Instead of dealing with call centers or getting disjointed information online, they put you directly in touch with tellers and bank officers who know their customers personally.

Community banks also possess the advantage of quickly and efficiently making loan decisions due to being locally-based compared with megabanks which must convene loan-approval committees in another state. Furthermore, their loans benefit local economies through small businesses and homeowners seeking loans from these community banks.

As a result, community banks tend to rank higher in customer satisfaction ratings than national banks; according to one recent survey, 80 percent of independent business owners who utilized community banks were pleased with their experience.

Lower or No Monthly Fees

Community banks typically provide free or low-cost checking and savings accounts, high interest rates for money market accounts and certificates of deposit (CDs) certificates, as well as mortgage, home, and small business loans at competitive rates. Furthermore, these banks usually charge lower or no monthly fees, making them more affordable to those on tight budgets.

Community banks differ from their larger counterparts by knowing their customers well and creating relationships based on trust with those applying for loans – an advantage especially if the applicant has poor credit.

Community bank loan officers often consider an applicant’s family history and discretionary spending habits when assessing his/her creditworthiness; this practice is known as relationship banking.

Free Checking and Savings Accounts

Contrasting with large national banks, community banks tend to be locally-owned and managed. Their earnings are used to provide loans in their area of operation as well as invest (both financially and emotionally) in its development.

Relationship banks are well-known for providing in-depth knowledge about local businesses and residents to facilitate credit underwriting for both consumers and small business owners. Proponents claim this often results in superior credit terms being extended.

Community banks offer many advantages, including no monthly account fees and lower or no minimum deposit requirements. Unfortunately, however, they don’t usually offer the same range of financial services offered by larger banks such as currency exchange or investment accounts with special features like FX trading capabilities and digital technology support – however they should still be considered when seeking basic checking and savings accounts in your local economy.

No Overdraft Fees

Community banks rely on relationships with consumers and entrepreneurs in their local areas to make recommendations regarding a variety of financial services. Community banks may be more agile when lending money for small businesses as they can respond more rapidly to changing market conditions than large megabanks which must convene loan-approval committees in other cities.

Overdraft fee income is an integral component of many community banks’ operating revenue, and eliminating it would likely be detrimental. But as an attempt to adapt to mounting pressures, some community banks are offering lower fees on certain accounts or adding ones without overdraft fees to respond more efficiently.

Andrews and Espinosa reported that community bankers seek major changes in regulation and taxation that create an equal playing field between all financial institutions, particularly fintech lenders and credit unions. This can include relaxing restrictions for fintech loans as well as altering tax considerations accordingly.

Special Loan Offers

Community banks play an integral part in keeping money local by lending money to residents or local businesses that rely on customers from that neighborhood. When local people or businesses secure loans from these local banks, the funds stay within the community where it belongs – creating enormous economic benefits that positively affect restaurants, bars, shops and malls that rely on those customers.

Community banks as small businesses themselves understand what it’s like to run a company and the challenges it presents, giving them unique insight into helping yours expand and prosper. Their firsthand knowledge can translate to service mentalities that will aid your expansion plans.

Community banks also typically offer more flexible fee schedules, including free checking and savings accounts without monthly fees, limited ATM or overdraft charges and limited ATM/overdraft fees. Furthermore, many are designated as community development financial institutions (CDFIs) which work to create economic self-sufficiency opportunities in low-income neighborhoods – something large national banks don’t do*. Some credit unions offer similar practices without the same tax benefits or regulatory burdens.