Reasons to Have a Local Bank

Your neighborhood bank might not have thousands of ATMs or a billion-dollar marketing budget, but it could offer something even more valuable: Better rates, lower fees and actual human beings who know your name.

Community banks have been quietly outperforming their giant competitors in ways that matter most to your wallet and your banking experience. Here’s why going local might be the smartest financial move you make this year.

Community banks vs. big banks: The real differences

Big national banks dominate the headlines with their sprawling branch networks, 24/7 customer service, and feature-packed mobile apps. But bigger isn’t always better when it comes to your money.

Community banks — typically defined as institutions with less than $10 billion in assets — operate on a fundamentally different model. Instead of serving millions of customers across the country, they focus on building relationships within their specific communities.

As of early 2025, there are 4,462 FDIC-insured commercial banks in the United States, with thousands classified as community banks serving local markets nationwide.

The difference shows up in real, measurable ways that affect your daily banking experience.

4 reasons to choose a local bank

If you’re interested in keeping your banking business local, there are various potential benefits worth considering:

1. Superior customer satisfaction scores

The numbers don’t lie: community banks simply treat their customers better. According to the 2025 American Customer Satisfaction Index, community banks scored 83 out of 100 for customer satisfaction, while national banks managed only 79.

For small business customers, the gap is even more dramatic. Two-thirds of small business owners preferred working with community banks to larger banks and fintechs, according to a recent study by the Independent Community Bankers of America (ICBA).

This satisfaction stems from the personal touch that’s nearly impossible to replicate at massive institutions. When you walk into your local bank, there’s a good chance someone will know your name, remember your last conversation and understand your financial goals.

2. Better rates and lower fees

Community banks often offer more competitive terms than their larger counterparts, both on what you earn and what you pay.

Lower fees across the board: Community banks charge 13-19% lower fees for overdrafts and nonsufficient funds compared to large banks. With the average overdraft fee now at $26.77, according to Bankrate data, even small savings add up quickly.

Competitive deposit rates: While online banks currently dominate high-yield savings with rates over 4 percent, many community banks offer surprisingly competitive rates on both savings accounts and CDs. Two-thirds of community banks have maintained strong profitability despite rising interest rates, allowing them to pass better rates on to customers.

Explore your options: Check out Bankrate’s best high-yield savings accounts to compare rates from both community and national banks.

3. Real support for the local economy

When you deposit money at a community bank, it stays in your community. These institutions make 60% of all small-business loans and 80% of agricultural loans in the United States, according to the ICBA, directly funding local businesses, farms and job creation.

This local focus creates a positive cycle: your deposits help fund loans to local businesses, which create jobs for your neighbors, who then become customers and depositors themselves. Unlike large banks that might use your deposits to fund loans halfway across the country, community banks are invested in your area’s success because their success depends on it.

4. Faster, more personal loan decisions

Community bank loan officers live in the communities they serve and understand local market conditions, employment patterns, and economic factors that algorithms miss.

This local knowledge allows them to consider factors beyond just your credit score — like your employment history, community ties and personal circumstances. The result is often faster loan decisions and more flexible lending criteria.

For small businesses especially, this can be the difference between getting funded and getting turned down. Community banks understand the local coffee shop owner’s seasonal cash flow patterns in ways that a national bank’s underwriting system simply can’t.

What you might miss at a local bank

Community banks aren’t perfect, and you should understand the trade-offs:

• Limited branch and ATM access can be inconvenient if you travel frequently or live far from the bank’s service area. Most community banks participate in ATM networks, but you’ll still pay fees at many locations.
• Fewer product options mean you might not find specialized services like investment management, business lending or international banking services.
• Basic mobile banking is improving rapidly, with 33% of community bank executives naming AI as their top technology trend for 2025. However, many still lag behind big banks in mobile app features and digital services.

How to find the right local bank

Start by using the search tool from the Independent Community Bankers of America to find institutions in your area. Look for banks that have been serving your community for decades — many local banks trace their roots back to the late 1800s.

Compare these key factors:

• Interest rates on savings and checking accounts
• Fee structures, especially overdraft and monthly maintenance fees
• Branch locations and ATM network access
• Mobile banking capabilities
• Loan products and approval processes

Don’t forget credit unions: These member-owned institutions often provide similar community benefits with even better rates and lower fees. Use the National Credit Union Administration’s search tool to find options near you. Here are Bankrate’s picks for best credit unions.

Making sure your money is protected

No matter what bank or credit union you choose, make sure your funds will be insured through the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF).

Keeping your money with a federally insured institution means your funds are insured for up to $250,000 per depositor, per insured financial institution, per ownership category. This insurance guarantees your money will be safe, even if the bank or credit union goes out of business.

Bottom line

If you like to keep your business local, a community bank or credit union might be worth considering. Shopping for a bank involves evaluating what products are offered as well as APYs and fees associated with accounts.

Other factors to consider include mobile banking offerings, the location of branches and ATM availability.

Ultimately, you may find your local bank provides a mix of these features that’s right for you, along with personalized service and involvement in the community.