The banking world is full of good news and bad news these days. But the news is better in some states than in others.
Nationally, the good news is that the banking system is more stable now than in recent years. According to the FDIC, there were 51 bank failures in 2012. This is less than 1 percent of all FDIC-insured institutions, and those 51 failures represent a significant improvement from the 92 in 2011, and the 157 in 2010.
The bad news is that savings account rates remain low, and cost-cutting has caused customer service to suffer at some banks. But how acutely you feel these problems may depend on where you live.
Mapping the banking landscape
For better or worse, banking conditions are largely a function of where you look. For example, 33 states had no banks fail in 2012, while Georgia had 10 -- nearly one-fifth of the national total.
To see how banking conditions stack up from state to state, MoneyRates.com has rated the 10 best and 10 worst states for banking based on the following factors:
- Customer satisfaction. This is based on Toluna survey data exclusive to MoneyRates.com.
- Stability. MoneyRates compared the number of 2012 bank failures in each state to the total banks based in that state.
- Availability of high interest rates. Bonus points were awarded to states that are home to branches of top-finishing institutions in the MoneyRates.com America's Best Rates survey.
- Size of the banking community. Though this was used only as a tie-breaker, the premise is that a larger banking community means more choices for consumers.
The 10 best states for banking
Based on the criteria described above, here are the 10 best states for banking:
- Ohio. Ohio residents gave their banks the fifth-highest average score for customer satisfaction. In addition, there were no failures of Ohio-based banks in 2012, so Ohio also scored well for stability. As a bonus, Nationwide Bank, which made the top 10 for money market rates in the most recent MoneyRates.com America's Best Rates survey, is based in the state.
- Kentucky. Kentucky's average satisfaction score ranked just behind Ohio's, and it also had no bank failures in 2012.
- Louisiana. Louisiana finished with the same overall score as Kentucky, with their rankings being decided by the tie-breaker based on the number of banks based in the state.
- Montana. Montana scored very high on customer satisfaction, and it also experienced no bank failures. But with relatively few banks based in the state, the latter did not weigh as heavily in the final score.
- West Virginia. A very similar story to Montana, with high customer satisfaction and no bank failures, albeit with a relatively small banking community.
- New York. Banks in New York received an above-average score in satisfaction, and the state saw no bank failures in 2012 out of the 175 institutions based there. New York is also home to more than 250 offices of Capital One Bank, which made the top 10 for savings account rates in the latest America's Best Rates Survey.
- Virginia. In addition to scoring well for customer satisfaction and having no failures in 2012, Virginia is also home to two of the top banks in the America's Best Rates Survey: Capital One and Acacia Federal Savings Bank.
- North Dakota. North Dakota finished in a virtual tie with Virginia, with Virginia winning the tie-breaker due to its larger banking community.
- Colorado. In addition to having no bank failures in 2012 and earning an above-average score for customer satisfaction, Colorado is home to Mile High Banks, a regular on the America's Best Rates top-10 lists.
- Texas. Texas scored slightly below-average on the satisfaction survey, but gets top marks for stability because it had no failures in 2012, despite being home to more than 500 banks. Texas residents also benefit from having access to branches of Capital One, whose rates often place it in the America's Best Rates top 10.
The 10 worst states for banking
So much for the good news. Here are the 10 worst states for banking, from the very worst to the 10th-worst:
- Illinois. Illinois had the 10th-worst score for customer satisfaction, and the state was home to eight bank failures in 2012.
- South Carolina. This state had a below-average rating for customer satisfaction and was home to two bank failures in 2012. That may not sound like many, but South Carolina does not have a particularly large banking community.
- Oklahoma. Oklahoma edged out South Carolina only by virtue of the tie-breaker.
- Minnesota. Besides scoring poorly in the customer satisfaction survey, Minnesota was home to four bank failures in 2012.
- Georgia. Georgia led the nation in bank failures in 2012, with 10.
- Rhode Island. Rhode Island had one of the lowest scores for customer satisfaction.
- North Carolina. With a below-average score for customer satisfaction and the failure of one of its banks in 2012, North Carolina only beat out Rhode Island by virtue of the tie-breaker.
- New Hampshire. New Hampshire's small banking community saw no failures in 2012, but earned one of the worst scores for customer satisfaction.
- Hawaii. Hawaii has a very small banking community, and it scored poorly for customer satisfaction.
- Indiana. Indiana suffered a bank failure in 2012, and also had a below-average score for customer satisfaction.
Did your state make either of the above lists? (If not, see the list of the 50-state rankings.) If your state made the list of best banks, it means there is no excuse for not having a harmonious relationship with your financial institution. There are likely some strong options available to you if you've struggled to find happiness with your current bank.
If your state is on the worst list, it doesn't mean you need to move to find a suitable bank. Instead, you might consider an online bank, most of which are available to residents throughout the country. According to recent MoneyRates.com research, you may also find higher rates and lower fees if you choose an online bank.
With the numerous banking options available today, settling for a mediocre financial institution makes little sense -- regardless of where you call home.