Rewards Checking Accounts Help Small Financial Institutions Compete

Lower fees are a big reason smaller institutions are selected over the behemoths. Many continue to offer no-fee checking accounts, provide access to surcharge-free ATM networks, and have lower overdraft fees and fewer fees overall. But lower fees don’t tell the whole story.

When comparing checking accounts between big and small banks, many bank shoppers on FindABetterBank choose small institutions because of no-fee checking and lower fees overall. However, “Rewards” checking accounts stand-out as a strong performer for small institutions by offering free checking, high interest rates and other desirable features like ATM fee rebates.

During Q2 2013, 137 banks and credit unions were listed on FindABetterBank continuously throughout the entire quarter. Fifty of these institutions have fewer than 100 branches, and at least one was present in 40% of all the search results generated by consumers in Q2 2013. Large institutions — banks with 1,000 or more branches — were present in 90% of all shoppers’ search results.

Smaller banks and credit unions didn’t even appear in half the search results, yet they were selected by one out of every four FindABetterBank shoppers. That means that when small institutions appeared in search results, consumers picked one 64% of the time.

Institution Size % appear
in search results
% selected
% selected
when present
Large (1000+ branches) 90% 38% 42%
Regional (100 – 999 branches) 80% 19% 24%
Small (Less than 100 branches) 40% 25% 64%
Direct Banks 54% 18% 33%

Read More: The Importance of Rewards Checking Accounts in a Post-Durbin World


Base: Q2 2013 FindABetterBank shoppers selecting an institution with fewer than 100 branches.

A handful of small institutions (26%) offer “rewards” checking accounts, and these accounts over-perform compared to their other checking products. That’s because these accounts are easily differentiated from the other checking products listed on the site — they’re free, offer high interest rates and other bells and whistles. In Q2 2013, small institutions offering Rewards Checking were only presented in 23% of searches when any small institution was presented, yet they accounted for 29% of all accounts selected from small institutions. Comparatively, a free checking account from a small institution was present in 92% of searches. Fifty percent of the accounts selected from small institutions were free checking accounts.

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