How bank closures hurt consumers and what can be done about it

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It’s no secret that as more services go digital, retail companies have sometimes struggled to find their place in the new reality. While many envision in-person shopping being replaced by online retail, a similar trend is occurring with US banks as consumers continue to visit physical branches less frequently.

In some communities, the fact that neighborhood banks have been forced to close their doors has caused significant damage to local economies and exacerbated existing financial inequalities.

Down, Select details what’s been happening with retail banking lately and how you can choose the best bank account for your personal and financial needs.

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Branch Closures Hurt Consumers and Communities

One of the fundamental decisions of Personal finance is about choosing where your money resides, and that’s usually in a bank. The vast majority of Americans, approximately 95%, have established bank accounts. According to 2019 FDIC data, approximately 5% of Americans remain “unbanked,” meaning they don’t have a traditional checking or savings account. And as banks continue to close across the country, that makes banking opportunities even more difficult.

For starters, the trend of bank closures is nothing new. In 2000, there were 8,000 commercial banks in the United States, according to FDIC data. By 2021, just over half of them, 4,236, were still standing, and that number continues to drop even in 2022; now down to 4194 as of March 31. Closures are also not limited to small banks in rural communities, as they are also happening to large legacy banks in densely populated areas.

According to a report from S&P Global Market IntelligenceWells Fargo led the pack with 267 bank branch closures in 2021, followed by US Bank and Truist with 257 and 234 branch closures, respectively. The five most affected states were California, with 269 branch closures; Michigan, with 247 branches; New York, with 221 branches; Florida, with 192 branches; and Illinois, with 153 branches.

While this trend is widespread, it has been hitting low-income and majority-minority communities the hardest. According to the National Community Reinvestment Coalitionone-third of branch closures between 2017 and 2021 occurred in areas that were predominantly low-income and majority-minority.

The ramifications of banks suddenly disappearing from communities aren’t shallow, either: Affected residents now have to drive farther to make a simple deposit or withdraw cash, which takes longer, for example.

The consolidation of bank branches is also creating “bank desertswhen communities do not have access to a bank or credit union within a 10-mile radius. Several studies have shown that these communities are more likely to use non-traditional, high-fee lending options like payday loans and check cashing services, which increases inequities and ends up widening the wealth gap.

While there may be fewer physical banking locations, there are still some options for consumers, regardless of what may or may not be available to you locally.

How to choose a bank

When you are When choosing a new bank or credit union, there are several things to consider to help you decide which option is best for your financial situation:

Evaluate account features and fees

First, if your bank is charging you monthly fees, find out why. With a wide variety of free bank accounts available, you really shouldn’t have to pay for a checking or savings account.

You may also want to review the other account features to see what else might be useful to you. For example, another bank may offer benefits like free credit monitoring or a higher interest rate than your current bank. Or, if you want better online tools, switching to a digitally smart bank could be beneficial.

When looking for a new bank, ask yourself this question: What features do I really need?

The answer could be anything from free ATM withdrawals, no overdraft fees or online bill pay to a well-designed website and mobile app, and 24/7 customer service. week. Any benefit that suits your needs should be the focus of your next bank account.

Digital banking vs. in person

Whether you live in a major city or a rural community, it’s hard to argue with the convenience of an online-only bank. According to JD Power 2022 US Direct Banking Satisfaction Studya quarter, or about 27%, of Americans currently use an online-only bank.

The study also suggests that online banks are better when it comes to customer satisfaction, with charles schwab and Discover Bank tied for first and Ally Bank followed in third place for checking accounts. Savings accounts had similar results, with American Express, Discover the bank and Charles Schwab in the lead.

If you tend to pay for your expenses with cards instead of cash, going digital might be a more efficient decision.

American Express® High Yield Savings Account

American Express National Bank is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • minimum balance

    The minimum balance to open is $0

  • monthly fee

  • Max transactions

    Up to 9 free withdrawals or transfers per statement cycle *Withdrawal limit of 6/statement cycle does not apply during the coronavirus outbreak per Regulation D

  • Excessive Transaction Fee

  • overdraft fees

  • Do you offer current account?

  • Offer ATM card?

American Express National Bank is a member of the FDIC.

Discover online savings account

Discover Bank is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • minimum balance

  • monthly fee

  • Max transactions

    Up to 6 free withdrawals or transfers per statement cycle *Withdrawal limit of 6/statement cycle does not apply during the coronavirus outbreak per Regulation D

  • Excessive Transaction Fee

    Discover may refuse to pay each transaction that exceeds the limitations. If you exceed these limits on more than one occasion, your account may be closed.

  • overdraft fees

  • Do you offer current account?

  • Offer ATM card?

    Yes, if you have a Discover checking account

Take advantage of welcome bonuses

Like rewards credit cards, banks sometimes offer welcome bonuses to attract new customers, usually in the form of cash incentives for maintaining a specified balance in your account or setting up direct deposit with your employer.

I have personally made a habit of switching banks for welcome bonuses and have made significant profits doing so. If you’re a bit flexible when it comes to choosing a bank, consider one of these active checking account bonuses:

  • Up to $400 to open and use a new PNC Bank Virtual Wallet — that’s $50 for a new Virtual Wallet, $200 for a new Virtual Wallet with Performance Spend, or $400 for a new Virtual Wallet with Performance Select.
  • A $200 bonus for opening a Chase Total Checking® account and set up direct deposit within 90 days (offer good through July 20, 2022).
  • A $100 bonus for opening a Chase College Checking Account℠ and complete 10 qualifying transactions within 60 days (offer valid until July 20, 2022).

Additional offers are also available and they change frequently, so be sure to check what’s available in your area or online often.

Bottom line

As the retail banking space has evolved rapidly in recent years, it may be time to reevaluate your banking relationship. Whether your local branch now has limited hours or has already closed its doors, or your financial needs have changed, switching banks can be a big financial step for you.

Catch up on Select’s in-depth coverage of personal finance, technology and tools, wellness and more, and follow us on Facebook, Instagram Y Twitter to be updated.

Interest rate and APY are subject to change at any time without notice before and after opening an American Express® High Yield Savings account.

Editorial note: Any opinions, analyses, reviews, or recommendations expressed in this article are solely those of Select’s editorial staff and have not been reviewed, approved, or otherwise endorsed by any third party.

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