Bored with Your Large Financial institution? Think about These Four Alternate options

August 30, 2021 6 minutes to read

This story originally appeared on NerdWallet

Checking account fees, minimal savings rates, impersonal customer care. The reasons why you choose to leave a major national bank vary, but where to go next can be a more difficult decision.

Many of the largest US banks have many of the same benefits, including large networks of bank-owned branches and ATMs, and robust mobile apps. But they also have many of the same drawbacks, such as high overdraft fees and low savings rates. If you want various benefits that better suit your needs, consider one of these four major banking alternatives.

Credit unions

Credit unions are not-for-profit, community-based institutions that generally have an emphasis on customer support. They offer similar accounts, services, and deposit insurance to major banks, but their accounts tend to have better interest rates. Compared to banks, credit unions pay, on average, higher interest rates on certain savings accounts and lower interest rates on auto and home loans, according to the National Credit Union Administration’s June 2021 data.

“Credit unions are about service, not profit,” said Chris Lorence, executive director of CU Awareness, a division of the Credit Union National Association. “Rather than giving money back to shareholders as dividends, credit unions give their members over-the-counter profits in the form of better tariffs, improved services, or access to services.”

Each credit union limits who can join as a member based on certain factors. These factors can be where you live or work, have a relative who is a member, or even belong to a particular group through a small one-time donation. These membership requirements mean that some credit unions are not available to everyone. Another potential disadvantage of credit unions is that they are lagging behind in adopting new technologies, such as mobile banking features, that large banks have the means to invest faster.

Community banks

Community banks are, in terms of asset size, smaller financial institutions that focus on specific geographic areas. They provide an important neighborhood presence for relationship-based banking, especially for mortgages and small business loans. One out of three rural mortgages was from a community bank or credit union with assets less than $ 10 billion, according to a 2018 report by the Brookings Institute. And in parts of the country, a community bank is the only physical bank within miles and can take into account more personal factors for loans and other accounts than large banks.

Community Banks – Raised by the Independent Community Bankers of America as banks with assets of $ 50 billion or less, loans totaled $ 429 billion and saved an estimated 49 million jobs, according to an ICBA analysis of Small Business Administration data. In addition, community banks processed PPP loans five to ten days faster than other PPP lenders.

At the start of the pandemic, “there were so many stories of small businesses failing to get an account with a major bank,” said Chris Cole, ICBA executive vice president. Community banks, meanwhile, played “an outsized role in PPPs in making sure businesses kept going”.

Like credit unions, community banks are struggling to keep up with the newer technology used by larger institutions and online-minded providers.

Online banks

Online banks are generally national institutions that customers access through websites and usually, but not always, through mobile apps. Since they have no branches, online banks can pass savings on to customers in the form of minimal fees and some of the highest savings rates available when they are not paying for brick and mortar locations. Some online banks are stand-alone entities and others are online divisions of traditional banks, but in each case customers’ money is through the Federal Deposit Insurance Corp.

About 40% of Americans who only opened accounts online in the first year of the pandemic did so because of their high rates, according to a NerdWallet study from 2021. Online savings account interest rates can range from 0.4% to 0.5% annual percentage return, which is over 20 times the average 0.02% interest rate for the basic savings option at any of the four largest banks – Chase, Bank of America, Wells Fargo, and Citibank. Online checking accounts typically have little or no overdraft fees compared to these four banks, which charge an average fee of $ 35 per transaction that makes an account negative.

Going to an online bank means foregoing certain services, which can include customer support at a branch, cash deposits, wire transfers, and cashier’s checks. Additionally, not all online banks offer the same variety of accounts, so make sure you choose one that has the types of accounts you need, whether they are checking accounts, savings accounts, or both.


Neobanks are financial technology companies that offer mobile-first banking services, especially low-cost checking accounts with more perks than traditional institutions. Neo banks like Chime and Current either work with a bank to provision their accounts or, on rare occasions, become a bank. In both cases, Neobanks have FDIC-insured accounts that act like normal online bank accounts.

These institutions use technology to provide features that most of the largest banks and some online banks do not, such as:

“Neobanks … are building many money management tools and financial health ideas into their core banking services from the start,” said Brenton Peck, director of the Financial Health Network, in an email. Some neo banks have “nicheeted themselves by meeting consumers where they were struggling financially,” like SoFi, which started out as a non-bank student loan refinancing firm.

Like online banks, neobanks do not have all of the services brick-and-mortar banks offer, such as personal support. And only a few Neobanks offer high savings rates. There have also been reports of Neobanks, particularly Chime, having slow customer support responses and handling suspected account fraud by abruptly closing accounts instead of giving customers enough time to respond to claims.

When you’re ready to leave your big bank behind, consider your banking needs – from early access to paychecks to high savings rates – to see if any of these four alternatives are better for you.

Spencer Tierney writes for NerdWallet. Email: [email protected]. Twitter: @SpencerNerd.

The article Tired of Your Big Bank? Consider these 4 alternatives that originally appeared on NerdWallet.

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