What to look for when choosing a community bank

Lacking the big budgets for television ads and billboards, community banks often aren't as flashy as their larger peers, but they are generally just as safe. Nevertheless, community banks are often overlooked by consumers, many of who fear a community bank won't have the resources to fulfill all of their banking needs.

For the most part, however, community banks can offer a full range of services and then some. In fact, community banks often offer perks and services that larger banks are just too large to offer like higher interest rates on savings accounts or better terms on loans. If you're looking to open an account with your local bank, here are some issues to consider:

An emphasis on community. Community banks are known for being plugged into your neighborhood. That's not to say a big bank can't provide that. I know the guy at a big bank I'm a member of would take exception to the idea that he is clueless. But the main decisions at a community bank are made at the community bank; there isn't a manager halfway across the country pulling the strings.

Determine what services you'll need. Gilles Gade, founder and chairman of Cross River Bank in Teaneck, New Jersey, suggests that you "have a little bit of vision" and think ahead to what banking services you might need someday.

"Some community banks offer loans; some don't. Some have credit cards; some don't," says Gade. "You have to think about what you plan on doing in your life and what kind of relationship you'll need to develop with your bank. That's the big differentiator between one community bank and another."

Other than the personal touch, does the community bank seem to be somewhat indistinguishable from a bigger bank?If a community bank reminds you of a bigger bank, that's a good thing. If you think about it, the bigger and smaller banks are all copying each other. Bigger banks will swear that they have the common touch and understand their communities. Community banks are touting how they have all the services you'll find at a larger bank.

But if a community bank doesn't seem to be doing that, if they don't offer a menu of services, then "they're lazy," says Gade. "In other words, pick a community bank that goes out of the way to cater to the needs of the customers."

What's their ATM reach? That's a question everyone should be asking, says Alex Matjanec, co-founder of MyBankTracker.com, a banking comparison site.

"You have a big bank, like Chase, and you can almost go to a Chase ATM across the whole country," says Matjanec, "but with a community bank, they may be linked into a network of ATMs. A lot of community banks do have a network, but not all of them, and so if your community bank doesn't have a very good system of ATMs you can use, you could start getting hit with those ATM fees."

Check out the website, as well as the branch. Since community banks tend to be close to home, many people will impulsively pull into a bank's parking lot, walk inside, like what they see and sign up. If so, Matjanec has a warning for you -- while most community banks' web sites are firmly implanted in the 21st century, some look like it's 1996. So make sure you take a look at it from the viewpoint of your PC or Apple, as well as, of course, dropping by the actual bank itself.

Do your homework. Gade suggests going to the FDIC.gov web site to see how the community bank you're considering is faring these days. With approximately 8,000 community banks in 50,000 locations, most community banks are going to be in fine health, but you want to make sure you don't get a lemon.

Matjanec also suggests checking in with your friends, neighbors, your mailman, and so on, and asking them if they use the community bank you're looking at -- and getting feedback from them.

The bottom-line is... the community bank should fit your needs, and so the best way to determine that is to do what most people do. "Make a checklist and look at the advantages and disadvantages," says Matjanec. "If you're constantly going to ATMs, or constantly running into a branch in various parts of the country, then a community bank might not be for you. If that's not as important, then community banks do offer a number of bonuses and rewards for working with them."

But whatever community bank you go with, if you do end up choosing one, just make sure "that they try to offer a slew of services," advises Gilles. "You may not need them today, but you will in the future."

Geoff Williams is a regular contributor to WalletPop. He is also the co-author of the book Living Well with Bad Credit.
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