Whether you want to open a checking account, savings account, or looking for loans or investment opportunities, you need to know and understand the different kinds of banks you can use. All banks might look the same, and most do offer the same services, but there are a few key differences you should know about before you open an account with a bank. Let’s dive into the different types of banks and which one is best for you.
Retail banks are the banks most of us think of when we talk about banks. These banks target consumers more. They offer their customers checking accounts, savings accounts, and retirement accounts.
These banks work to facilitate anything a person would need on an individual level, from loans to mortgages and certain brokerage services. These banks do not work with or offer loans to businesses or corporations.
Commercial banks primarily focus on providing loans to businesses and corporations. Usually, they offer most of the services a regular retail bank would, like checking and savings account. Still, when compared to retail banks, there can be additional expenses and higher fees on their services and products.
These banks’ main purpose is to finance businesses by providing loans, equipment lending, commercial real estate, and more. If you are looking to start your own business, commercial banks are the way to generate capital, lend equipment and open new lines of credit for your business.
Investment banks differ from both previous bank types on this list. Their primary purpose is to earn and make profits through investing. These banks work with individuals, businesses, and corporations, advise them on investments and provide other financial guidance. They trade and manage stocks, bonds, and securities for their investors, among other services.
These banks act as financial intermediaries and advisors for their investors or customers. Investment banks make profits by charging commissions on the returns they get on their investments. These banks are ideal for corporations and individuals with enough capital to invest.
Credit unions are just like retail banks, with the only difference being that investors own retail banks for-profit. In contrast, members own credit unions and are non-profit institutions. Since members own and run credit unions, they use the profits earned to provide high-interest rate savings and low-interest loans.
You have to become a member to use a credit union, and memberships are often limited. Credit unions are highly localized, and you need to have a link or connection to the union to become a member. Credit unions are owned and run by elected members, so policies can differ vastly depending on the elected members.
Discover The Different Types of Banks That Work Best For You
What kind of bank is best for you usually depends on your financial needs. Also, finding the correct type of services and features is more important than finding the right kind of bank. Understand and compare the different kinds of banks available to you, and see what fits you best and gives you the best return.
If you require different and various services, you could also consider using multiple banks to get the best services and features. You could open a savings account at a credit union to get the maximum return while opening a checking account at a retail bank to get higher convenience on withdrawals.