So, what comes in your mind first when you hear the word bank? A place where you save money and have usual checking and savings account, once in a while take loans, right? The bank is way more than you think and so it is important to understand what are some bank accounts. There are various types of banks and I am going to outline some of the most important once. Let’s take a look.
Most common bank types are
- Commercial Banks
- Retail banks
- Investment Banks
- Central Banks
- Online Banks
- Credit Unions
- Mutual Banks
Many of these banks, you may do not even heard about. Let’s understand them one by one. Keep in mind, many banks can fall in more than one category, for example, one bank can be both commercial and retail.
Retail banks
I am starting with retail banks as you are most familiar with this type. This is your usual banking experience with checking, savings accounts. Retail banks focus on retail consumers. They provide savings, checking, money market accounts, and loans. Retail banks also offer credit cards. They have many brick and mortar locations across the country. Most common retail banks are Chase.com, BankofAmerica.com, wellsfargo.com, pnc.com td.com, city.com and so on.
Commercial Banks
Their consumers are big businesses which require complex services and loan accounts to go with regular checking as well as savings accounts. They also have higher transactions. Many eCommerce businesses do customer transactions via such commercial banks. Many retail banks serve as commercial banks but there are separate commercial banks as well.
Investment Banks
These banks help business in the financial and stock markets. When a firm requires to bring IPO (Initial Public Offering) it needs an investment bank. It also helps business in various other services like selling off debts, bankruptcy, valuation, etc. These banks usually do not have branches.
Central banks
The central bank is the federal bank. It is the government system to manage and control currency. Federal Reserve controls interest rates for all other banking institution across the country. It also helps manage the debt and currency valuation for the country.
Credit Unions
Credit unions are more like retail banks but they are mostly owned by investors. These kind of are not-for-profit organizations. They are mostly serving a small customer base geographically. Their customers have something in common, for example, they are from the same state, same employer, etc.
Online Banks
As the name suggests, these banks are online only. They do not have any branches. Because of the cost-saving from operating local branches, they can offer better interest rates in most instances. These banks offer everything a retails bank offers, just all services are online. Many retail banks offer online services as well such as bill pay, payments to credit cards, transfer, etc.
Now as you know about different bank types, time to learn about different Bank Account Types. If you would like to go to any other Finance topic, go through this Personal Finance article.