Online Banking vs. Local Banking, Which is Better?

June 2, 2007

Online banking with companies such as Bank of America and Wachovia are great for convenience and access but sometimes they can’t offer the service of a local bank.

Banking Trends
Making money from lending and deposits has grown increasingly competitive over the last 10 years and profit margins have narrowed for local and regional banks. In an effort to compete with national banks and purely online banks such as ING Direct local banks are diversifying their revenue streams and working harder to keep their customers.

Banking Service
Other than good interest rates, what would keep you at your current bank? One of the first things that comes to mind is the level of service they provide. I recently experienced that service first hand at our local bank.

Credit Card Assistance
I opened a business account with our bank this year and they worked with me to open a credit card for the company. This was helpful because even though the LLC had no established credit rating my bank granted me credit card with a $1000 limit in order to build up a credit history.

I haven’t used the credit card yet, for reasons I’ll discuss next week, so when the first statement came in the mail I figured I had no balance and it went to the to-file stack. When I finally opened the credit card bill I discovered that they had charged me an annual fee, even worse, the payment for the bill was due 10 days ago.

After a quick phone call to the head of our local branch my bank agreed to pay the fee for me. They contacted the credit division to ensure nothing negative would be reported to the credit reporting agencies for the late payment, and are trying to get my annual fee waived.

The best part was the bank did all of this without me even asking. I called up, explained my problem, and they were on it. The service not only met my expectations, but exceeded them, which is a great way to keep me as a customer.

Go Online and Stay Local
We use both online banking and our local bank for our financial needs. We have our emergency fund with ING Direct to earn better interest rates. Our personal and business checking accounts are with our local bank so we can count on personal service.

We still have the convenience of accessing balances & making transfers online because our bank offers web interface into our accounts. Setting up our ING Direct account so we can transfer money to and from our local checking accounts gives us the flexibility we need.

Using a combination of online and local banking gives us the best of both worlds, good interest rates and great service. What local and online banks have you had good luck or bad experiences with?


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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4 Responses to Online Banking vs. Local Banking, Which is Better?

  • Ben

    I agree Art, the relationships you build with your local bank, especially if you’ve been a customer for many years, can come in very handy at times.

  • MoneyNing

    I think it is better to do both online and local banking. I use my local bank for my checking account because my company uses the same bank and there are many perks that comes with that.

    However, the online savings account have such a high yield that you just cannot pass up!

  • Art Dinkin

    Whenever possible I always buy local. The reasons are simple. Money spent in my community helps build my community. That makes my community a better place to live, increases my property values, supports businesses who pay taxes and provides the local government with the funds they need to educate my children and provide community programs. In short, buying local improves my families quality of life.

    I bank at TWO local banks. At each I know my banker personally. Most of my dealings are done with a phone call or face to face. Yes, paperwork is required… but it is usually the last step, not the first. Like the time I needed a fairly large loan – quickly. It was approved as a signature loan (meaning my signature was the only collateral they needed) within hours. By the way, this bank does not do signature loans without approval from the bank president. He knows I have accounts at the other bank too, but I do not think getting a slightly higher rate at an online bank would have helped build my relationship.


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