How bank closures are hurting consumers and what you can do about it

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

In some communities, neighborhood banks forced to close have caused significant damage to local economies and exacerbated existing financial inequalities.

Below, Select details what’s been going on 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 – around 95% – have opened bank accounts. According to 2019 FDIC data, about 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 not new. In 2000, there were 8,000 commercial banks in the United States, according to FDIC data. In 2021, just over half of them, 4,236, were still standing, and that number continues to drop even in 2022 – it’s now down to 4,194 as of March 31. The closures are also not limited to small banks in rural communities, as also happens to large traditional banks in densely populated areas.

According to a report by S&P Global Market Intelligence, Wells Fargo leads the pack with 267 bank branch closures in 2021, followed by US Bank and Truist with 257 and 234 branch closures, respectively. The five hardest hit states are 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 hits low-income and majority-minority communities even harder. According to National Coalition for Community Reinvestmenta third of the branches closed from 2017 to 2021 occurred in low-income and majority-minority areas.

Nor are the ramifications of banks suddenly disappearing from communities at the surface level – affected residents now have to drive further to make a simple deposit or withdraw money, which takes longer, for example.

The consolidation of bank branches also creates “banking deserts“, when communities do not have access to a bank or credit union within 10 miles. Several studies have shown that these communities are more likely to use non-traditional, high-fee lending options such as than payday loans and check cashing services, which increases inequality and ultimately widens the wealth gap.

Although there may be fewer physical banking locations, there are still options for consumers, despite what may or may not be available 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 choose the best one for your financial situation:

Assess account features and fees

First, if your bank charges you a monthly fee, find out why. With a wide variety of no-fee bank accounts available, you really shouldn’t pay for a checking or savings account.

You can also check out other account features to see what might be useful to you. For example, another bank may offer benefits such as free credit monitoring or a higher interest rate than your current bank. Or, if you want better online tools, it might be worth switching to a digitally-savvy bank.

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 payments to a well-designed website and mobile app, and 24/7 customer service. . Benefits that match your needs should be the focus of your next bank account.

Digital or in-person banking

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

The study also suggests that online banks are the best in terms of customer satisfaction, with Charles Schwab and Discover Bank tied for first place and Ally Bank for third place for checking accounts. Savings accounts had similar results, with American Express, Discover the Bank and Charles Schwab leading the pack.

If you tend to pay for your expenses with cards rather than 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)

  • The minimum balance

    Minimum balance to open is $0

  • Monthly fee

  • Maximum transactions

    Up to 9 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

American Express National Bank is a member of the FDIC.

Discover the online savings account

Discover Bank is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • The minimum balance

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

    Discover may refuse to pay for each transaction that exceeds the limits. If you exceed these limits more than occasionally, it may result in the termination of your account.

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

    Yes, if you have a Discover current account

Take advantage of welcome bonuses

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

Personally, I got into the habit of changing banks to get welcome bonuses and made significant profits. If you’re a little flexible when it comes to choosing a bank, consider one of these active checking account bonuses:

  • Up to $400 for opening and using a new Virtual Wallet by PNC Bank – it’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 bonus of $200 for opening a Chase Total Checking® account and set up direct deposit within 90 days (offer valid until July 20, 2022).
  • A $100 bonus for opening a Chase College Checking Account℠ and completing 10 qualifying transactions within 60 days (offer valid until July 20, 2022).

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

At the end of the line

Because 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 opening hours or has already closed, or your financial needs have changed, switching banks can be a great financial step for you.

Check out Select’s in-depth coverage at personal finance, technology and tools, The well-being and more, and follow us on Facebook, instagram and Twitter to stay up to date.

The 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, criticisms or recommendations expressed in this article are those of Select’s editorial staff alone and have not been reviewed, endorsed or otherwise endorsed by any third party.

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