You put a lot of thought into where you shop. Maybe you’re a hole-in-the-wall boutique kind of person, or the type that knows exactly when to hit which malls or big box stores to snag the best deals.
You put a lot of thought into where you eat. You know your favorite place to get a slice and a Coke on the run, and your once-in-a-blue-moon deluxe date night destination.
You put a lot of thought into where you get your groceries, whether you’re buying in bulk, keeping it strictly plant-based, or spending the extra dollars to ensure a free range, all-organic spread on your plate.
You’re thoughtful about how you spend your money, so why don’t you pay as much attention to where you keep your money? When’s the last time you thought about which bank you should be using?
What’s your bank done for you lately?
For many (if not most) of us, where to bank is one of those out-of-sight, out-of-mind questions that doesn’t take up a lot of mental real estate. You may have signed up for a checking account and savings account when you left home for college or started your first job. You kind of need one to get paid via direct deposit (or to receive timely cash infusions from mom and dad). If you’re on the younger side, an online bank may be the only bank account you have. If you’re more in Gen X or Boomer territory, the chances are higher that you may have an account with an older, established local credit union. If you’re an entrepreneur, you’ve undoubtedly needed a crash course in how to manage a business bank account.
Odds are good that you probably also have a credit card in addition to your debit card, and maybe a few loans to juggle, each with its own monthly fee and interest rate.
No matter what your situation is, in other words, you bank. You deal with one or more (probably more) banks month in and month out, even if you’re not visiting a branch or listening to your financial institution’s cheesy hold music every day. And if you’re like most of us, you have multiple bank accounts, which means different account balances, interest rates, monthly statements and bills, and other fun stuff like that to juggle at all times.
A lot of people shut down their brain at this point. Who wants to spend their precious time thinking too much about banking? As long as you’re making your payments on time and not racking up fees for things like going below your minimum balance or overdrafting, you have nothing to worry about. Right?
Not so fast. If you’re a health- or value-conscious shopper, you can apply that same logic to selecting the best financial institution, like a bank or credit union, to better serve your specific needs and meet your specific goals. Which type of bank or credit union you choose to manage your money will have a major impact on how you organize and achieve your financial goals way down the line.
Let’s get into how.
What are the different kinds of banks?
Let’s revisit some of the common scenarios mentioned above. You left your hometown to go to college out of state, everything is an adventure. But this rite of passage also comes with a new set of responsibilities. A major bank is on campus to get you set up with the basics: a checking account, savings account, maybe a credit card too. This is a bank whose name you already know, and one of their major selling points is that they have branches everywhere, from the campus coffee shop, to your hometown haunt, to the beach you’re planning to hit for spring break.
This is what’s called a megabank, and the definition is in the word itself. They’re mega, coming with a major footprint, and often a global chain of offices and operations. These are the “too big to fail” banks you hear about when the rest of the economy is underwater — the ones that get bailouts.
If you’re a little younger and your habits skew more digital, you’re more likely to have your finances wrapped up with an online bank. These are sometimes called neobanks, and reflect the unique set of circumstances that have disrupted the online banking offerings of megabanks as technological innovation has outmaneuvered those slow-moving corporate behemoths.
The third major type of bank is a broad category with less of a snappy name: community financial institutions. The lack of marketing pizazz in this term is part of the charm. Community financial institutions include small, local banks and credit unions that offer all of the same traditional banking services as megabanks, from checking and savings accounts to credit cards and personal loans. They’re also subject to the same federal regulations as megabanks, but are much smaller in scale and much more focused on community.
Choosing the best bank for you
So what should you look for in a bank? Should you go with a megabank, neobank, or community financial institution?
Megabanks are convenient but will probably cost you more money in the long run. They’re more likely to hit you with sneaky service fees on your checking account or savings account, and their customer services leave a lot to be desired. Unlikely you’d ever speak to the same person twice. What else would you expect from a company with thousands and thousands of employees?
Neobanks are good for getting a loan quickly and easily, especially if you’re an app-first Gen Z type exclusively interested in online banking. If you’re savings-oriented, however, neobanks might not offer the best rates for some banking services, like loans or debit accounts. Neobanks also aren’t famous for great customer service — they’re even more likely to outsource this than a megabank with a huge phone bank of people to throw at customer problems.
Community financial institutions aren’t so easy to categorize in such broad terms, but the best of them will offer all of the tried-and-true banking practices that are at the core of a megabank’s offerings, while also staying up with the times and adopting some of the same sleek digital product offerings as the neobanks you might see ads for on TV.
Do you know where your money is?
We here at Kasasa® are on the side of the good guy: your neighborhood bank and credit union. And we want to tell you why! But first, ask yourself: Which type of bank are you using right now?
There’s a decent chance you don’t have a clear answer. Many people have multiple accounts spread across a number of financial institutions, including megabanks, neobanks, small local banks, and credit unions. Maybe you have that megabank checking and savings account from college, not sure how much is in there, then a separate savings account at a credit union, which you use to receive direct deposits from your employer, and you have an auto loan that you took out with a third bank. You might not even have a clear picture of your total finances, the overall picture of how much you have (your savings) versus how much you owe (your debt).
If you have a very clear picture of everywhere your money is at this moment — all of the different banks and financial institutions that have a hand in where it’s circulating — good for you! You’re probably in the minority though. If you have a fuzzy-at-best picture of which banks are handling your money at the moment, you’re in the right place. Keep reading.
Are you a spender or a saver?
Put another way: Do you view your bank account as mainly a place to keep your money flowing? Cash in on payday, cash out for the next 2-4 weeks? Then you’re a spender, and you probably don’t want to think about your bank account at all, as long as you don’t dip below your minimum balance and your debit card doesn’t stop working. Fair enough.
But maybe you’re the type that puts every cent you can spare into a savings account with better-than-average perks, and you’re way more thrilled watching that number climb than you are with the transitory thrill of online shopping. You are a bit more selective about where you stash your savings, more likely to have investigated money market accounts and other high-yield savings accounts. You’re a saver, with your eye on the prize of future financial freedom.
But the world doesn’t break down neatly into binaries, and this is kind of a trick question. A lot of us are trying actively to go from “mostly spenders” to “mostly savers,” whether that means trying to sock away 10% of every paycheck, or juggling multiple personal loans, auto loans, and maybe eyeing a mortgage in the near future.
Thinking more carefully about which banks, credit unions, or community financial institutions you’re choosing to do business with can help you identify ways that you can manage your spending and saving more efficiently, and more effectively. No matter where you are in your financial life, planning for your economic future is always a good idea, and the right bank can be an invaluable ally in getting where you want to go.
Advantages of using your local bank
The advantages of choosing a community bank or credit union to manage your funds are many! Kind of a pet topic for us here at Kasasa.
Check out our guide to sustainable banking for a deeper dive, but here are some bullet points:
A community financial institution will be more invested in your long-term well-being. This is a big one. Community banks and credit unions operate at a much smaller scale than megabanks, and the best of them put a focus on real, human relationships front and center. As a whole, they’re not as interested in gimmicky promotions to open accounts as megabanks are, and they’re not as flashy as the emerging neobanks. This is the most obvious reason to go local because it speaks to your basic self-interest. A community financial institution is far more likely to view you as a person than a number, and their customer service should reflect that. As a result, a local bank or credit union is a more reliable partner in getting a grip on your total financial picture.
Banking local makes a huge economic impact. Think loans and jobs. Remember that just like your go-to grocery store, a bank is a business. A megabank is a multinational corporation most likely; a neobank is often a skeleton crew working in laptop cafes across the world. Neither is concerned about what’s going on in your backyard, but your neighborhood bank or credit union is there issuing small business loans to your buddy’s upstart kolache stand, and an auto loan to your niece who just got her license.
Local banks and credit unions appreciate your business... and know how to show it. You're more valued at a community bank or credit union, full stop. Your relationship means more, and is literally worth more. Today, many local banks and credit unions give out rewards (as in, cash) as part of your checking account. (At Kasasa, we partner with hundreds of local financial institutions to help make that possible.)
Your local community bank or credit union is just as secure as any larger bank. A big concern for many people is that working with a small bank or credit union means you have to give up some of the assumed benefits of a megabank or neobank, like top-notch security features. Not so. All banks and credit unions are subject to federal security standards and safety protocols. In order to operate, all financial institutions must meet rigorous compliance standards. Many community banks and credit unions also give you access to other services for your peace of mind, whether that’s a physical lockbox for priceless possessions, or a robust identity protection service for protecting your digital assets.
Shop local, eat local… Why not bank local?
We know there’s no one-size-fits-all solution that will meet everyone’s banking needs. Some people really just want to stick with their traditional savings account, even if there are better-designed, 21st-century alternatives available. Maybe you are now and will forever remain a spender, living life in the fast lane, even if that means you’re not likely to meet a savings goal any time soon.
But a lot of people out there are trying to move from “spender” to “saver,” to get their money right so they can get out of debt faster and watch their savings account swell over time. For those types, Kasasa is your one-stop-shop for banking local.
Whether you need a high yield savings account, a reward-packed checking account, or a personal loan that will help you consolidate all of your existing debt and make it a lot easier and more straightforward to manage, Kasasa and our national network of community financial institutions are here to help you get your finances in focus, and to get your money right.
Discover more about Sustainable Banking in our previous blog post, "Why shop local during the holidays?"