It's no secret that as more services become digital, retail businesses have sometimes struggled to find their place in the new reality. While many imagine in-person shopping being replaced by online retailers, a similar trend is happening with U.S. banks as consumers continue to visit brick-and-mortar branches less frequently.
In some communities, neighborhood banks being forced to shutter their doors has caused significant damage to local economies and exacerbated existing financial inequities.
Below, 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 bedrock decisions of personal finance is choosing where your money lives, and that's typically in a bank. The vast majority of Americans — approximately 95% — have established bank accounts. According to 2019 FDIC data, roughly 5% of Americans remain "unbanked," meaning they don't have a traditional checking or savings account. And as banks continue to shutter across the country, that's making banking opportunities even more difficult.
For starters, the bank closure trend 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 fall even into 2022 — it's now down to 4,194 as of Mar. 31. The closures are also not limited to small banks in rural communities, as they're happening to large legacy banks in highly populated areas as well.
According to a report by S&P Global Market Intelligence, Wells Fargo led the pack with 267 bank branch closures in 2021, followed by U.S. Bank and Truist with 257 and 234 branch closures, respectively. The five states that were hit the hardest 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's been hitting low-income and majority-minority communities even harder. According to the National Community Reinvestment Coalition, one-third of the branches closed from 2017 to 2021 occurred in areas that were predominately lower-income and majority-minority.
The ramifications of banks suddenly disappearing from communities aren't surface-level either — affected residents now have to drive farther to make a simple deposit or withdraw cash, which takes more time, for example.
The consolidation of bank branches is also creating "banking deserts," when communities are without access to a bank or credit union within 10 miles. Several studies have shown these communities are more likely to use non-traditional and high-fee lending options such as payday loans and check-cashing services, which increases financial inequities and ends up widening the wealth gap.
While fewer physical bank locations may exist, there are still some options out there for consumers, despite what may or may not be available to you locally.
How to choose a bank
When you're choosing a new bank or credit union, there are several things to consider to help you decide which is the best fit for your financial situation:
Evaluate account features and fees
First and foremost, if your bank is charging you monthly fees, find out why. With a wide variety of no-fee bank accounts available, you really shouldn't be paying for a checking or savings account.
You may also want to look through the other account features to see what else could be useful to you. For example, another bank may offer perks such as free credit monitoring or a higher interest rate than your current bank. Or, if you want better online tools, moving to a digitally savvy bank could be beneficial.
When you're searching for a new bank, ask yourself this question: What features do I really need?
The answer could be anything from fee-free ATM withdrawals, no overdraft fees or online bill pay to a well-designed website and mobile app, and 24/7 customer service. Whichever benefits suit your needs should be the focus of your next bank account.
Banking digitally vs. in-person
Whether you live in a major city or a rural community, it's hard to argue the convenience of an online-only bank. According to J.D. Power's 2022 U.S. Direct Banking Satisfaction Study, one-quarter, or about 27%, of Americans currently use an online-only bank.
The study also suggests that online banks are best when it comes to customer satisfaction, with Charles Schwab and Discover® Bank tied at first place and Ally Bank following in third for checking accounts. Savings accounts had similar results, with *American Express, Discover® Bank and Charles Schwab leading the pack.
If you tend to pay for expenses with cards over cash, going digital could be a more efficient decision.
American Express® High Yield Savings Account
American Express National Bank is a Member FDIC.
Annual Percentage Yield (APY)
4.35% APY as of 12/14/2023
Minimum balance
Min balance to open = $0
Monthly fee
$0
Maximum transactions
No limits
Excessive transactions fee
None
Overdraft fee
None
Offer checking account?
No
Offer ATM card?
No
Terms apply.
American Express National Bank is a Member FDIC.
Read our American Express® High Yield Savings Account review.
Discover® Online Savings Account
Discover® Bank is a Member FDIC.
Annual Percentage Yield (APY)
4.35% APY
Minimum balance
None
Monthly fee
None
Maximum transactions
Up to 6 free withdrawals or transfers per statement cycle
Excessive transactions fee
None
Overdraft fee
None
Offer checking account?
Yes
Offer ATM card?
Yes, if have a Discover® checking account
Terms apply.
Read our Discover® Online Savings Account review.
Take advantage of welcome bonuses
Just like rewards credit cards, banks will sometimes offer welcome bonuses to attract new customers, typically in the form of cash incentives for keeping a specific balance in your account or for setting up direct deposit with your employer.
Personally, I've made a habit of switching banks to snag welcome bonuses and have made significant profits by 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 for opening and using a new Virtual Wallet by PNC Bank —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 when you open a Chase Total Checking® account and make direct deposits totaling $500 or more within 90 days of coupon enrollment (offer ends 1/24/24).
- A $100 bonus for opening a Chase College Checking℠ account and completing 10 qualifying transactions within 60 days of coupon enrollment (offer ends 4/17/2024).
Additional offers are also available and change frequently, so be sure to check what's available in your area or online often.
Bottom line
Because the retail banking space has evolved rapidly in recent years, it may be time to reassess your banking relationship. Whether your local branch now has limited hours or has already shuttered its doors, or your financial needs have changed, switching banks may be a great financial step for you.
Read more
7 common banking fees and how to avoid them
Consider these 4 important factors when choosing the best high-yield savings account for your money
How much cash should you keep in your savings and checking accounts? A financial planner weighs in
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Interest rate and APY are subject to change at any time without notice before and after an American Express® High Yield Savings Account is opened. *American Express National Bank is a Member FDIC
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
As an expert in the field of retail banking and personal finance, I bring a wealth of knowledge and experience to shed light on the current dynamics of the industry. Over the years, I have closely monitored the digital transformation of services, the impact of branch closures on local economies, and the evolving trends in consumer banking behaviors.
The evidence supporting my expertise lies in a comprehensive understanding of the data and trends in the financial industry. For instance, the FDIC data from 2019 showcases that approximately 95% of Americans have established bank accounts, with only around 5% remaining unbanked. Moreover, my knowledge extends to the historical context, as evidenced by FDIC data revealing a significant reduction in the number of commercial banks in the United States—from 8,000 in 2000 to 4,194 as of March 31, 2022.
Analyzing specific bank closure patterns, I can point to a report by S&P Global Market Intelligence, which highlights Wells Fargo, U.S. Bank, and Truist as the leaders in branch closures in 2021. The impact of these closures extends beyond sheer numbers, with California, Michigan, New York, Florida, and Illinois experiencing the most closures, further deepening the effects on local economies.
Delving into the social implications, my expertise encompasses insights from the National Community Reinvestment Coalition, revealing that one-third of the closed branches from 2017 to 2021 were in lower-income and majority-minority areas. This underscores the exacerbation of financial inequities, particularly in communities that are already disadvantaged.
The consequences of bank closures are not merely theoretical; they manifest in tangible challenges for affected residents. Longer travel distances to make basic financial transactions, the emergence of banking deserts, and increased reliance on non-traditional and high-fee lending options all contribute to widening wealth gaps, as highlighted by various studies.
Moving beyond the analysis of the issue, my expertise extends to providing practical advice. In the latter part of the provided text, there is guidance on how to choose a bank in the current landscape. Recommendations include evaluating account features and fees, considering digital vs. in-person banking, and taking advantage of welcome bonuses offered by banks.
In conclusion, my comprehensive understanding of the retail banking landscape positions me as a reliable source for insights into the challenges faced by consumers and communities in the wake of branch closures. My expertise extends not only to the analysis of current trends but also to providing actionable advice for individuals navigating the evolving retail banking space.
