7 Myths About Big Banks


Big banks dominate the financial and social landscape. Their advertising is pervasive on television and online and millions of Americans use their services every single day. But are big banks really the best place to do your banking? To help you decide, here’s a look at seven myths about big banks.


1. Myth: Big Banks Charge Fewer Fees

Some people assume that large bank networks don’t have to charge as many fees as smaller banks. After all, they assume, the big banks have more customers, so they make plenty of money on smaller fees. However, this typically isn’t true. On average big banks charge significantly higher fees than small community banks.


Fees make up nearly 40% of big banks’ revenue, and banks with over $1 billion in assets earn over 8% of their profits from overdraft fees alone. Eager to boost those numbers, big banks seem to continuously raise their fees and that doesn’t just apply to punitive fees such as overdraft charges. On average, consumers pay $4.57 per transaction to access funds from out-of-network ATMs. That’s $2.90 from the bank that owns the ATM and $1.67 from their own bank.


2. Myth: Large ATM Networks Are Essential

To avoid ATM surcharges, your first thought may be that you need a large ATM network. After all, when you use an in-network ATM, you usually don’t have to pay for it, and most big banks have large networks. That said, many community banks are also connected to relatively large ATM networks, giving you free access to thousands of participating ATMs around the country.


On the other hand, it’s important to consider the fact that large ATM networks are no longer that essential. Many people are moving away from ATMs. They can easily get cash back when they shop at stores or forgo cash altogether by using credit and debit cards or electronic payment systems. Alternatively, you can avoid ATM surcharges by choosing a bank that doesn’t assess surcharges on its end and also reimburses the surcharges assessed by other banks.


3. Myth: Only Big Banks Offer Free Checking

Free checking accounts are getting more and more difficult to find, but they are still around. However, you may need to go to a community bank or a credit union to get one. In 2009, 76% of big banks offered free checking accounts, but now, according to research from Bankrate, only 38% of larger banks offer free checking accounts. In contrast, 72% of credit unions and many smaller banks offer free checking accounts.


4. Myth: Money Is Only Safe at Large Banks

In spite of higher fees, some people think they need to put their money in a big bank to keep it safe. Again, that simply isn’t true. The Federal Deposit Insurance Corporation (FDIC) guarantees all deposits up to $250,000 at big banks, including funds in checking, savings, and money market accounts as well as certificates of deposit. But this protection isn’t just extended to big banks.


All insured banks offer FDIC protection to their customers, and in Massachusetts, banks of all sizes can add an additional layer of protection through the Depositors Insurance Fund (DIF). DIF insures all deposits over the FDIC threshold. Note that banks aren’t required to be insured. To be on the safe side, you should make sure a bank is insured before you deposit funds there.


5. Myth: You Don’t Need a Brick-and-Mortar Bank

As fintech becomes more advanced, many online banks are popping up. These institutions exist totally online and they have no physical presence. For many consumers, the draw is that online banks tend to charge lower fees because they have less overhead than their brick-and-mortar counterparts.


However, that isn’t necessarily true. You can get truly free checking at many community banks, plus the combined advantages of online banking and a brick-and-mortar location. When you need to apply for a mortgage, get information about a business loan, or ask questions about certain banking services, a face-to-face conversation can be essential. You simply can’t get that with an online bank.


6. Myth: Larger Banks Have Better Technology

Large banks don’t have a monopoly on technology. In fact, they are sometimes behind the technological curve. As fintech has exploded over the last decade or so, larger banking networks have struggled to keep up. Alternative online lenders, payment systems, and many others started to fill holes where banks weren’t meeting their consumers’ needs.


Eventually, the banks caught on and they began partnering with these companies. For instance, JPMorgan Chase, the biggest bank in the country, partnered with OnDeck (an alternative lender), and by using OnDeck technology, Chase was able to review business loans faster.


Now, however, the majority of technology you need is available at both large and small banks. Many community banks have developed mobile banking apps that meet or surpass the quality of most big banks’ apps. You can use these apps to check balances, make transfers, initiate bill payments, or even deposit your paychecks.


7. Myth: Big Banks Are Better for Business Loans

When people start a business, they often think they need amenities offered by big banks. So, they simply set up their business accounts or start applying for loans at these institutions. However, the real numbers tell a different story.


As of 2018, large banks only approve 25% of business loan applications, and shockingly, that’s a record high. In contrast, small community banks accept 49% of business loan applications. That means you’re about twice as likely to get approved for a business loan at a small bank compared to a large bank.


If you want the technology and amenities of a big bank with the personal touch of a community bank, consider Blue Hill Bank. Based in Hyde Park, we have branches throughout Eastern Massachusetts. To learn more, contact us today.