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Game Plan for Locavestors
The Last Real Banker? 77
Community banks and credit unions are the last vestige of the oldfashioned
relationship- based banking system that once ruled the
land—think George Bailey’s Building & Loan. These institutions are
small (with less than $1 billion in assets), locally owned, and rooted
in their communities. Their business is making loans to local families
and businesses, so the dollars you deposit with one of these institutions
are much more likely to support your local economy than, say, be
plowed into speculative trading. That local bank model is under threat,
however. Community banks are being squeezed by increasing consolidation
in the banking sector and disproportionately higher capital and
regulatory costs.
Pros:
• Banking locally is the simplest, least risky way to support your community.
Community banks and credit unions offer a wide range
of fi nancial products and services, from savings and checking
accounts and CDs to credit cards and mortgage loans.
• Typically, locally owned institutions offer lower fees and higher interest
rates on savings and checking accounts than large banks, as well
as better rates and fewer fees on credit card and loan products.
• Unlike big banks, their main business is lending to individuals and
companies in the area. So, by doing business with a community
bank or credit union, you are investing in your community while
saving yourself money.
Cons:
• The smallest banks and credit unions may have limited ATM networks,
although this is not always the case.
• Small banks do not have the deep balance sheets and access to
cheap capital that big banks have, and many are struggling in the
wake of the fi nancial crisis.
•
Community bank and credit union deposits are FDIC insured, but it
is a good idea to check out the fi nancial health of a bank or credit
union before you switch. The Move Your Money campaign has
a tool that allows you to screen out underperforming fi nancial institutions
(see the following page for more information).