A Tale of Two Cities: The Rural-Urban Divide in Banking

50 Pages Posted: 13 Jul 2022

Date Written: August 30, 2023


Bank branches in counties with a high rural population offer certificate of deposit (CD) rates of up to 22% higher than banks in counties that are more urban. Although bank size does explain some of this result, controlling for large bank results in a 5.6% to 8% rural CD premium. I show that higher CD rates in rural counties are not a function of credit quality of rural borrowers and are not explained by rural CD depositor impatience or rural bank capital constraints. Overall, my findings highlight an important difference in the way rural and urban depositors interact with the financial system.

Keywords: rural, deposits, CD rates

JEL Classification: G530, N20, O160

Suggested Citation

Traweek, Virginia, A Tale of Two Cities: The Rural-Urban Divide in Banking (August 30, 2023). Available at SSRN: https://ssrn.com/abstract=4137605 or http://dx.doi.org/10.2139/ssrn.4137605

Virginia Traweek (Contact Author)

Texas Christian University ( email )

Fort Worth, TX 76129
United States

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