Is this the best of times or the worst of times for banking? The answer may depend on where you live, according to MoneyRates.com's 2014 Best and Worst States for Banking study.
To determine banking conditions by state in 2014, MoneyRates.com looked at four criteria:
- Breadth of choice. Scores in this category were based on the number of active banking institutions based in each state, according to FDIC statistics.
- Stability. This was determined by the percentage of each state's banks that failed during 2013. Most states had no failures last year, but seven states had multiple banks go under.
- Quality of service. This ranking was based on the average "Power Circle Ratings" of banks available in each state, according to the 2014 J.D. Power U.S. Retail Banking Satisfaction Study.
- Competitive rates. Every quarter, MoneyRates.com conducts the America's Best Rates survey to find the best savings account rates and money market rates in the country. States were ranked according to the availability of top 10 banks from this survey.
Nationally, the number of bank closures has slowed dramatically since the dark days of banking crisis, and many banks are offering technical innovations that better suit people who bank on-the-go. However, banking is a very diverse industry, and different banks serve different states. The data collected in the survey confirm that some states are seeing the best that banking has to offer today, while other states are experiencing the worst.
Top states for banking in 2014
Based on the criteria above, here are this year's 10 best states for banking:
- Missouri. Missouri won by ranking in the top 10 for breadth of choice, stability and customer service, and for being served by one of the America's Best Rates top 10 winners. Missouri has a thriving banking industry with more than 350 banks based in the state, and out of that large population the state experienced no failures during 2013.
- Kansas. Missouri's neighbor, Kansas, claimed runner-up honors. Like Missouri, Kansas has a wide range of local banks available, and suffered no failures last year. Kansas is served by two banks noted in America's Best Rates, but it finished outside the top 10 (though still above average) in customer satisfaction.
- Nebraska. A third Midwestern bank claimed the next spot on the list. Nebraska does not have quite as much choice available as Missouri and Kansas, but it had no bank failures, ranked in the top 10 for customer satisfaction and is served by two America's Best Rates banks.
- Massachusetts. Massachusetts ranked fourth in customer satisfaction, and had no bank failures last year. However, while having an above-average number of banks, it was outside the top 10 for this category, and it was not served by any America's Best Rates award winners.
- California. There were no bank failures in California last year, even though the state has one of the 10 largest banking populations. Another strength is that two banks offering America's Best Rates are available in California. However, the state did fall outside the top 10 in customer satisfaction.
- Oklahoma. Oklahoma scored just outside the top 10 in both customer satisfaction and breadth of choice, and did not have any of its banks fail last year.
- Pennsylvania. The banking profile of Pennsylvania is very similar to Oklahoma's, with scores just outside the top 10 in customer satisfaction and breadth of choice, and no bank failures during 2013.
- Iowa. Iowa ranked fourth overall in number of choices, had no failures last year, and is served by one of the America's Best Rates banks. Its only relative weakness was in customer satisfaction, where it ranked just a little above average.
- New York. Though not a powerhouse in either category, New York was well above average in quality of service and breadth of choice, had no failures last year and is served by one of the America's Best Rates honorees.
- Arkansas. Despite ranking in the middle of the pack for breadth of choice, Arkansas benefited from strong customer satisfaction scores, and like the rest of the states in this top 10, had none of its banks fail in 2013.
Customers have a wide range of banking choices across most states, and thus can benefit from actively shopping for banks. But because the choices are especially good in the 10 states above, customers in these areas may wish to be especially demanding.