The Best States to Bank In, And the Worst

NEW YORK (MainStreet) — Word of advice: if you live in Nevada, it just may be smarter to do your banking at the Harrison family's Gold & Silver Pawn Shop, or maybe at the nearest casino. That's because in a state by state ranking by MoneyRates.com of the best places to bank, Nevada comes in dead last.

Also See: Happiness Index -- Nevada Left in the Dust

That, explained Richard Barrington, senior financial analyst at MoneyRates, is a rating based upon four measurements: breadth of choice (how many banks compete for your business), stability (how many banks failed), quality of service (crunching numbers from a recent J. D. Power study) and competitive rates (how much do savings accounts and money market accounts pay).

Nevada was dragged down in the rating, because it had a bank fail, and it also may be the state with the most severe fallout from the nation's housing crisis. Plenty of Nevada homeowners are still upside down, and there also were many foreclosures. In the past decade, it's been a tough state to be a banker and, not surprisingly, it's tough too to be a bank customer.

Knowing the bottom banking state is the easy part.

What's hard is predicting who the winners are and, get this, the third and fourth richest states per 24/7 Wall Street numbers (Alaska and Connecticut) score surprisingly poorly for the banking services provided their affluent residents (median household income in Alaska is $67,712, almost double the household income in the poorest state, Mississippi, with a median household income of $37,095).

Mississippi, incidentally, scored a very respectable 12th in the MoneyRates rankings.

None of the five richest states appear in MoneyRates top five states to bank in.

Getting the sense that there's no clear correlation between the wealth of a state's population and the banking they receive?

That becomes more evident when the scorecard is revealed.

Drumroll. Here are the five best states for banking:

  • 1. Missouri
  • 2. Kansas
  • 3. Nebraska
  • 3. Massachusetts
  • 5. California

And the five worst:

  • 46. Alaska
  • 47. Washington
  • 48. Connecticut
  • 49. Arizona
  • 50. Nevada

Bottomline: Live in a top five state and, per MoneyRates, you'll have a lot more choice when it comes to banks and the choices will be better, too.

Live in a bottom five state, and you'll want to scout for options that are outside your region or non-traditional.

One small quibble with the ratings. Barrington acknowledged that he did not factor in credit unions - there are perhaps 6,800 nationally - and in some states they play a significant role in delivering competitive retail banking. North Carolina, for instance, ranked a dismal 38 in the MoneyRates scorecard. But that state also houses the nation's second biggest credit union, State Employees' in Raleigh, which claims 1.9 million members.

Also See: Should You Join a Credit Union? 72 5 of Them Still Offer Free Checking

North Carolina also has many other big credit unions, such as Coastal Federal in Raleigh with 188,000 members and Truliant in Winston-Salem with 182,000 members.

Many, many consumers in the Tar Heel state are getting good - often free - checking and other services simply because in that state it is easy to elect the credit union option.

Put these institutions in the mix and, quite possibly, the rankings would change.

Another issue - acknowledged by Barrington in an interview - is that more of us are using distant and online banks such as Capital One 360 (which offers free checking nationwide). We also are making more use of so-called non banks such as Bluebird, via American Express and Walmart, which is not a traditional bank - but for its users, it may be all the bank many need.

Also See: Why Online Banks Are Giving the Stock Market A Run for Its Money

That is, we are not necessarily hostage to the perhaps meager and hostile banking choices in our own community.

That becomes the cure for those who live in bank deserts such as Las Vegas and Phoenix.

Barrington endorsed that viewpoint: "Whether you are in a good state or a bad state, there are a lot of choices," he said.

Barrington added: "Don't settle. Shop around. Online banks are providing more access than ever. Consumers need to be aware and to exercise that choice."

He concluded: "There is a lot of inertia on the part of bank customers. Consumers should be more demanding."

--Written by Robert McGarvey for MainStreet

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