The glass-sided Umpqua Bank branch on Sansome Street in San Francisco’s Financial District could easily be mistaken for an upscale community center. Umpqua, a small, regional bank that operates mainly on the West Coast, tailors its “stores” (its name for branches) to the communities where they’re located. So the Sansome branch regularly hosts events for its clientele—mostly young professionals—including yoga and networking get-togethers. The Noe Valley branch across town, which caters to a more family-oriented customer base, sometimes calls in its ice-cream truck to serve free treats. The bank considers these events part of “Umpqua life,” and the goal is to connect with customers in ways beyond banking.

But at Umpqua, even conventional banking is conducted unconventionally. For example, customers fill out deposit slips at a “banking bar” that looks like the reception desk at a fancy hotel, and when they need to sign something, a “universal associate” might pass them free cookies or a cup of Umpqua’s proprietary blend coffee along with a pen.

In contrast, many customers of USAA bank would be hard-pressed to find a branch at all. The San Antonio-based bank has just 20 nationwide compared with Umpqua’s 331 (or Chase’s more than 5,400). That’s because USAA, which mainly serves military families scattered all over the U.S. and the world, doesn’t put much emphasis on face-to-face contact. It operates primarily as an online bank; most customers transact business via computers, smartphones, telephone call centers, and ATMs. Account holders can get free checking without maintaining a minimum balance, and they can pay bills online, use debit cards, and withdraw cash fee-free at more than 65,000 networked ATMs nationwide.

Those two seemingly opposite approaches to retail banking—one lifestyle oriented, the other digital and largely transactional—have one thing in common: both lead to highly satisfied customers. In fact, Umpqua and USAA were among the better-rated banks in our survey of more than 49,000 subscribers, who provided more than 70,000 bank and credit-union ratings.




That’s not the case for the largest banks. The past 30 years have brought a wave of consolidation as large banks have grown even larger through mergers or by gobbling up smaller banks in acquisition sprees. Now about 40 percent of all U.S. commercial bank assets are held by just four mega banks: Bank of America, Chase, Citibank, and Wells Fargo. Large banks have the marketing muscle to heavily advertise, put their names on sports stadiums, sponsor tennis tournaments, and open branches in expensive neighborhoods. Those efforts get them the lion’s share of public attention, but that doesn’t seem to help when it comes to customer satisfaction. All four mega banks scored in the bottom fifth of our overall rankings, though as a group, our readers were still satisfied with them in general.

What are smaller institutions like Umpqua and USAA doing that the mega banks aren’t? There’s no single answer, but our survey suggests that the little guys benefit by focusing on the unique needs of their customers. In Umpqua’s case, that means in-person service and community engagement. USAA uses technology to offer virtual customer service and low fees.

Those two banks aren’t anomalies. Despite all of the consolidation, there’s still a remarkable amount of choice and innovation in the banking industry. Our survey found more than 60 smaller banks—including ones that operate mostly online—and credit unions that provide compelling alternatives for customers dissatisfied by or uninterested in big banks. For those who do appreciate the nationwide reach and convenience of many branches, one of the big four banks may well be the best option.

The good news in banking is that consumers have options; no one has to settle for merely acceptable service. Moreover, consumers who were unwilling or unable to open bank accounts because of high fees and minimum balance requirements now have more options than they may realize. If you like your current bank and feel like sticking with it, great. But read on, because we’ll help you structure your accounts to make sure you’re getting the lowest fees and highest interest rates possible. And if you feel like ditching your bank, our survey Ratings can help you find a better one.

Here’s a guide to help you understand your options:

Mega Banks: Best for Convenience, Technology, Security

Pros
Bank of America, Chase, Citibank, and Wells Fargo have a significant nationwide presence: a combined 17,000-plus branches and more than 80,000 fee-free ATMs coast to coast, including some located in supermarkets, drugstores, and convenience stores. “For the 40 percent of our customers who live paycheck to paycheck, it’s all about convenience,” says Thong Nguyen, president of retail banking at Bank of America. He says they think about “how fast can I deposit money and have access conveniently, seamlessly, and with no surprises,” such as unexpected holds or fees.

To achieve that, big banks offer state-of-the-art digital banking platforms. And because high-profile brands are under constant attack by cyber criminals, mega banks have sophisticated security systems, according to a 2015 study by the Government Accountability Office. The biggest ones are also more likely to deploy advanced security measures, such as fingerprint log-in for mobile banking. Wells Fargo is experimenting with voice- and face-authentication systems. Keeping your accounts safe means less hassle for you and lower fraud costs passed on to all depositors.

Cons
All that cutting-edge technology isn’t always enough to stay ahead of the bad guys, as evidenced by the theft of identifying information from 76 million Chase households in 2014. (Chase maintains that no actual fraudulent activity resulted from that breach.) And despite the popularity of online and mobile banking, consumers still go to branches to interact with tellers or bankers. But for customer service, the Big Four banks landed near the bottom of our rankings, with only middling ratings in that area.

Nguyen of Bank of America admits that smaller banks often have an advantage because of their more personalized knowledge of their customers. He says his bank is working on developing a more “intimate” experience by hiring more specialists and full-time tellers in its branches.

“Branches absolutely remain an important part of how we serve customers,” says Andrew Brent, a Citibank spokesman. “We are aware that today’s consumers have new and heightened expectations of what the branch experience should be.” Wells Fargo said it puts more stock in its own customer surveys. Chase declined to comment about our findings.

Big-bank banking can also be pricey. Although our readers reported that free checking is widely available, 57 percent who had such an account at a big bank had to meet minimum balance requirements, compared with only 49 percent at smaller banks, 25 percent at credit unions, and 13 percent at primarily online banks. That’s because credit unions, for example, tend to offer absolutely free checking regardless of account balances.

Credit Unions: Best for In-Person Customer Service, Lower Costs

Pros
Credit unions are among the highest-rated services we’ve ever evaluated, with 93 percent of their customers highly satisfied, on average, vs. 69 percent for the four biggest national banks. That satisfaction is driven by good customer service, not surprising when you consider that credit unions are owned and managed by their members.

Unlike profit-making banks, credit unions are tax-exempt. Members usually have access to free checking, slightly higher interest rates on certificates of deposit, and significantly lower rates for credit card and auto loans. About 80 percent of credit unions offer free checking vs. only about half of conventional banks, according to Moebs Services, a bank research firm in Lake Forest, Ill.

However, fees still creep in because of overdrafts and other charges. But on average, credit-union members pay annually only $71 per year for checking while bank customers pay $183, according to a study of all transactions and fees in more than 16,000 bank and credit-union accounts by Victor Stango and Jonathan Zinman, professors at the University of California, Davis, and Dartmouth College, respectively.

And while big banks romance well-to-do customers, credit unions reach out to help underserved communities. Because of their nonprofit status and mission to serve members, “credit unions provide the best alternative for the ‘underbanked,’ since our fees and account requirements are lower or less stringent,” says Joe Fagenstrom, a spokesman for Star One, a credit union in Santa Clara County, Calif.

Cons
The average credit union has only three branches; some larger ones, such as those in our Ratings, have many more. But the members of 3,500 credit unions can access account information and cash through systems such as the CO-OP network of 30,000 fee-free ATMs. And members of certain credit unions can also use a network of 5,000 branches nationwide that have tellers. Internet banking is another option, but credit unions tend to trail banks in their digital offerings.

Another inconvenience: Membership eligibility is limited because credit unions are often linked to an employer or a group, such as a labor union or church. But community-based credit unions have more relaxed rules, and almost anyone is potentially eligible to join a credit union somewhere. To find one (and check eligibility), go to mycreditunion.gov.

 

Primarily Online Banks: Best for Online Customer Service, Higher Savings Rates, Lower Costs

Pros
Like credit unions, banks that operate mostly online earned the highest overall satisfaction levels we’ve seen for any service, with 93 percent of customers highly satisfied. How do those virtual institutions make customers happy when little or no face-to-face interaction is involved? With technology.

As primarily digital organizations born in the Internet age, virtual banks have the edge when it comes to connecting with customers electronically. Our data found that customers at traditional banks were twice as likely as virtual-bank customers to express frustration with time-consuming automated voice systems, problems with online transactions, or confusing websites. Taking a wide variety of potential problems into account, just 11 percent of the customers of virtual banks complained about the service they received, but 14 percent of credit-union customers, 25 percent of people who used smaller traditional banks, and 32 percent of those who banked at the Big Four did.

Virtual banks also provide significantly higher yields on savings products. Big banks such as Chase and Wells Fargo were paying only 0.01 percent in annual interest on money in basic savings accounts last November, but online Ally Bank was paying a full 1 percent. That means $25 in earnings over a year for $2,500 on deposit at Ally vs. just 25 cents from Chase and Wells. For a five-year CD, Ally was paying a 2 percent annual yield; Bank of America, 0.15 percent. On a $10,000 deposit, the yield after 5 years with Ally would be $1,052 vs. $75 with Bank of America.

Customers at traditional banks may have to use their own bank’s ATMs to avoid fees, but withdrawals are free at USAA’s 65,000 Preferred ATMs, which are part of the Allpoint, MoneyPass, and PNC Bank networks. (USAA pays the networks so that its members can use their ATMs.) Capital One 360 also waives ATM fees at the 40,000 machines in its network. Schwab lets customers use any bank’s ATMs and gives them unlimited reimbursements for the fees charged.

Cons
If you prefer in-person contact at a walk-in branch from time to time, an online bank is probably not for you.

 

Smaller Regional and Community Banks: Best for Personal Service

Pros
Because they’re more community-based, smaller banks tend to focus more on relationships, and their customers like that. In our survey, 77 percent of respondents were highly satisfied with them.

Some small banks know that one-on-one engagement is a valuable distinction. When customers phone the 24-hour call center of Frost Bank, a top-rated Texas regional, they get Lone Star State hospitality. “We don’t send you through a call tree to push this number, that number,” says Paul Olivier, its chief consumer banking officer. “Our phones are answered by a human being.”

Community banks also provide critical capital to local economies; they’re leading providers of credit to entrepreneurs and small businesses. Depending on where you live, a community bank may be your only brick-and-mortar option in any case. They serve 600 counties in the U.S. where there’s no big-bank presence.

Cons
Most community banks have only about four to seven branches, according to the Independent Community Bankers of America. And some of them may not be part of a network of ATMs, which could be a major inconvenience and expense when you’re away from home.

And not all of the smaller banks in our survey rated well. HSBC, which has branches in 10 states plus Washington, D.C., had the lowest overall satisfaction score, doing poorly in customer service, complaints, and fee increases. But Rob Sherman, an HSBC spokesman, said, “We are continuously evaluating our service programs and making improvements to enhance the customer experience.”

Correction: An earlier version of this article stated the number of bank and credit union ratings provided by respondents to our banking survey as more than 74,000. The correct number is more than 70,000.

Editor's Note: This article also appeared in the January 2016 issue of Consumer Reports magazine.