Is this a good time or a bad time to be a bank customer?
On the one hand, bank failures have slowed to a trickle. On the other hand, other forms of industry consolidation, in the form of mergers and acquisitions, have continued to reduce the range of bank choices available to consumers.
Another contrast can be seen in the fact that while online banking has made a variety of new services available to customers, the simple goal of earning a decent rate of interest on savings accounts and CDs has been made very difficult in today's era of low interest rates.
Just as banking conditions generally are a mixed bag of positive and negative developments, they are also a study in contrasts as you move around the country. Banking conditions are clearly better in some states than in others.
To measure the best and worst states for banking, MoneyRates.com looked at four factors:
- Availability of choice - based on the number of banks in each state
- Stability - based on the percentage of each state's banks that failed last year
- Customer satisfaction - based on averaging the JD Power ratings of banks with branches available in each state
- Access to top bank rates - based on which states have branches of banks that made the latest MoneyRates.com America's Best Rates (ABR) lists of top savings accounts and money market accounts
Best States for Banking 2017
Based on the four criteria described above, here are the 10 best states for banking:
As of the most recent Federal Deposit Insurance Corporation (FDIC) data, there are 541 banks based in Texas, giving Texans the widest range of local banking choices of any state. Despite that large number of institutions, Texas suffered no bank failures last year. Plus, banks in Texas are not just financially sound but, in many cases, they offer especially competitive bank rates. Four banks from the ABR lists have offices in Texas, tied for the most in any state.
With 226 banks based in the state, California may lag well behind Texas, but it still has one of the largest numbers of choices of any state. California actually has an edge over Texas in customer satisfaction, ranking in the top 10 on average while Texas ranked 15th.
The only area in which Kansas fell outside the top 10 was in average satisfaction score, and this was still above median.
This state is a close second to Texas in number of home-based banks, and also suffered no failures last year. However, for all those choices, only one ABR bank has offices in Illinois.
Consumers are especially happy with their banks in Oklahoma, as institutions with branches in the state had the highest average JD Power score of any state.
6. Florida (tie)
Ranking in the top 10 in number of home-based banks means Florida offers plenty of choices. With three ABR banks having a presence in the state, those include some high-quality choices.
6. Virginia (tie)
Virginia is about middle-of-the-pack in number of choices, but stands out for the quality of those options with a top-10 rank in average customer satisfaction score.
Ranking near the top in availability of ABR banks with high yield savings accounts and money market accounts was a big help to this state's score, as was having no failures last year.
This state's characteristics were fairly similar to those of Massachusetts, though Colorado ranked a few spots lower for number of choices.
10. New York
You might expect a state that is home to one of the world's major financial centers to rank a little better than this, but where New York fell down was with a below-average score for its average customer satisfaction rating.
Worst States for Banking 2017
The following states ranked worst based on a combination of the four criteria MoneyRates used for this study:
Despite its massive size geographically, Alaska has the fewest number of home-based banks of any state. That adds up to a lack of choices, and Alaskans are not particularly happy with those choices: The state ranked dead last in average customer service score among banks with local branches.
2. Rhode Island
While Rhode Island may seem like Alaska's opposite in terms of size and location, it suffers from similar problems when it comes to banking -- a limited number of locally-based choices, and very poor customer satisfaction scores.
There are a decent number of banking choices in Wisconsin as the state ranks in the top 10 with 257 locally-based banks. Unfortunately, they are not all great choices. The state was one of just a handful to experience a bank failure in 2016 (there were just five nationally) and its average customer satisfaction score was below median.
Not surprisingly for a small state, Vermont ranks among the lowest for number of banking choices, but this is exacerbated by the fact that its average customer service score is below median.
This state offers a decent number of choices. However, with no ABR banks having a presence in the state and suffering one of the few bank failures nationally last year, Pennsylvania residents may take issue with the quality of those choices.
A few New England states fared poorly in this study. In the case of Connecticut, the problem was a combination of a limited number of choices and poor customer service scores.
7. Arizona (tie)
Despite having relatively few locally-based banks, Arizona was one of the few states to suffer a bank failure last year.
7. North Dakota (tie)
Customer service was the downfall for North Dakota's banks, as it ranked ahead of only Alaska in this category.
This was another state done in by a very poor average customer service score.
Because so few states suffered a bank failure last year, those that did really stood out in a bad way. Tennessee was one of those states. On the plus side, it did rank in the top 10 for average customer satisfaction score.
This article began by describing some contrasts in the banking industry, and here is another one - even as the total number of banks and branches continues to decline, online banking is improving access to banking options in many areas. In time, this should reduce the difference in the quality of banking from one state to another. But for now, those differences still exist - especially for customers who prefer to bank locally.
Full Ranking of Best and Worst States for Banking 2017
If you didn't see your state in the best or worst states lists, you'll find it in the full ranking of all 50 states:
|State (Alpha Order)||Overall Rank||Customer Satisfaction Score||No. of Banks Based in State||% of Banks Failures in State in 2016||No. of "America's Best Rates Banks" with Locations in State|