While a bank’s size is determined primarily by the assets it holds, the size of a bank may also influence the range of services and products it offers. Small banks may offer a more personalized customer experience, while big banks may be more comprehensive, offering an array of deposit accounts, loans, insurance, financial planning and wealth management.
When choosing a bank, and understanding how different banks operate, size is only one consideration, however. Whether the institution is a regional or national bank is another factor that can determine whether it’s a good fit for your needs.
Key Points
• Large financial institutions, as defined by their assets, typically provide a wider array of financial products and services than smaller ones.
• Community banks may excel in offering tailored, individualized customer experiences.
• Extensive ATM networks are a hallmark of major banking organizations.
• Smaller regional banks frequently charge less for banking services and transactions than major traditional banks.
• Technological innovation and digital banking solutions are more prevalent in larger banks.
Are Small Banks Safer Than Large Banks?
The Federal Deposit Insurance Corporation (FDIC) is an independent agency that helps protect most banks and their customers by insuring deposits in the very rare case of a bank failure. The size of a bank doesn’t affect its eligibility for FDIC insurance. The money you have on deposit with an FDIC member bank is fully protected up to $250,000, per depositor, per insured bank, per account ownership category. For those who want to keep a considerable amount of money on deposit, it can be wise to look for those banks that participate in programs that extend the FDIC insurance to cover millions.
Also important: Although it’s the customers’ money that’s covered by the FDIC, the agency is funded by premiums paid by the banks and from earnings on investments in U.S. Treasury securities. Customers do not pay for this insurance; they are automatically covered when they open an FDIC-insured account.
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Types of Banks
When considering the benefits and drawbacks of different types of banks, it’s important to weigh the size as well as whether the bank is regional or national in scope. You may also want to consider whether a given institution is an online bank (i.e. as a digital bank, without brick-and-mortar branches) or if it provides online services and physical locations.
Small Banks
The criteria that determine a bank’s size can vary widely depending on the source.
According to the FDIC’s definition, small banks are banks with assets of less than $1.609 billion for either of the two calendar years prior to December 31, 2024. That might not seem all that small, but it’s a fraction of the trillions of dollars in assets that some larger banks maintain.
Small banks can also be defined as commercial banks of modest size. A commercial bank is simply a bank that accepts deposits, offers checking and savings accounts, and makes loans to customers.
Midsize and Large Banks
Midsize banks have assets that generally fall between $10 billion and $100 billion. Banks with assets north of $100 billion are considered large banks.
Community Banks
Community banks can be small or midsize institutions. They are smaller than regional banks, and like regional banks they may offer specific products that cater to local businesses (e.g. agricultural loans).
Regional Banks
Regional banks are generally larger than community banks, but they are also anchored in a specific geographic area and may have a niche focus.
National Banks
A national bank is a commercial bank that’s chartered by the U.S. Treasury’s Office of the Comptroller of the Currency (OCC). As part of the national network of U.S. banks, a national bank has a defined role in the country’s banking system, including an ongoing relationship with its local Federal Reserve Bank.
The important thing to understand if you’re inquiring into the merits of one bank versus another is that the size, products, services, features, and focus of an institution can overlap in various ways.
Other Types of Financial Institutions
The above only covers some of the most common types of banks. Here are some others.
• Savings and loan associations are financial institutions that are primarily focused on helping customers get residential mortgages.
• Niche banks focus on a particular audience, such as medical professionals, farmers, or the LGBTQ+ community.
• Mutual savings banks are a kind of credit union that originally served low-income communities and focused on providing mortgages.
• Community Development Financial Institution (CDFI) banks. Many people may wonder what a CDFI is. These are financial institutions that aim to create economic opportunity for individuals and small businesses, quality affordable housing, and essential community services.
• Online banks are the same as traditional banks in many ways, but they provide services online rather than via bricks-and-mortar branches.
• Neobanks are fintech businesses that operate in similar ways to an online bank. They may partner with FDIC-member banks or other financial institutions to offer accounts and banking services through an app or online. Neobanks, however, do not have bank charters and technically aren’t banks.
You may notice that some of the organizations mentioned above are defined as thrifts or credit unions. When comparing credit unions vs. banks, the main difference to note is how they operate.
Credit unions operate on a membership basis; there are usually specific requirements to join. A credit union is member-owned while a bank is not. Both can offer deposit accounts and loans, though credit unions return profits back to members in the form of higher rates for savers and lower rates for borrowers.
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How Small Banks Differ From Large Banks
When looking at big banks vs. small banks, there are a number of things that set them apart beyond the scope of their assets. Understanding the main differences can help if you’re on the fence about whether to open an account at a large bank or bank locally instead.
Here are some of the most notable ways big banks and small banks differ.
| Big Banks | Small Local Banks |
|---|---|
| Can offer a wide range of financial products and services, including deposit accounts (such as checking accounts and savings account), loans, credit cards, insurance, business banking, and wealth management | May have a narrower range of products and services; may offer products and services that serve the local community or a specific population |
| Usually have a sizable ATM network, as well as numerous branch locations | Typically have a smaller ATM network and fewer branches |
| May charge higher fees for ATMs and other services and offer lower interest rates on deposit accounts, especially if a traditional bank | May charge fewer and/or lower fees and offer more competitive rates on deposit accounts and loans |
| Service is often standardized and designed to fit all customers | Services may be more personalized |
| May use the latest technology, with an emphasis on mobile and online banking | May be slower to pick up on and adopt the latest tech trends |
Tips for Choosing a Bank
There are a number of things to consider when picking a bank or switching banks to make sure you find the right fit. If you’re hunting for a new bank, here are some of the most important questions to ask:
• What kind of banking products and services do I need? And what kind of banking products and services are offered?
• Do I feel comfortable and banking online-only, or will I need branch banking services from time to time?
• How much can I expect to pay in fees for an account?
• What kind of interest rates do deposit accounts earn? Are high-yield savings accounts offered?
• Is there a minimum deposit requirement or a minimum balance requirement?
• How large is the ATM network? Are there any fee refunds for using out-of-network or foreign ATMs?
• When is customer support available and how can I reach them?
• Are the online and in-app features state-of-the-art?
• Will a teller or bank officer be available if I need to consult with someone, person to person?
• Does the bank support the community in any way?
Whether you’re considering a big bank or a small bank, check to see if it’s FDIC-insured. Again, FDIC insurance covers deposits up to $250,000 per depositor, per account ownership category, per bank in the rare event of a bank failure. And some banks participate in programs that extend that coverage to millions.
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The Takeaway
Whether to keep your money at a big bank or a small bank is a matter of personal preference. Some people appreciate the accessibility, state-of-the-art tech features, and full array of products and services of a big bank. Others may prefer the more personalized experience they find at a small local bank. Finding the right banking partner can be an important step in achieving financial security.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
How is a small bank different from a large bank?
Small banks can differ from large banks in a number of ways, including assets, products and services offered, geographic footprint, and cost. The most common metric used to measure bank size involves assessing its assets according to FDIC guidelines.
Should I switch to a local bank?
Switching to a local bank could make sense if you want to bank close to home and enjoy having a personal relationship with the bank’s staff. When comparing local banks, consider the types of accounts and services offered, the fees you’ll pay, how you’ll be able to access your money, and customer support.
What is an advantage of local community banks?
Local community banks can offer numerous advantages, starting with personalized service. A local bank may be less costly than a larger bank and have lower employee turnover. You can also bank closer to home and may find that the financial institution offers special products and programs tailored to the local community.
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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
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