The Basics of Banking: Types of Banks

Retail Banks-Also known as Personal or General Banking Institutions. These banks service the general public. These banks will offer all the same services: Checking and Savings accounts, Loans and Mortgage services, Financing, and overdraft protection. These banks will often also offer a credit card service and foreign currency exchange. Retail banks often cater to high-net-worth individuals, giving them specialty services like private banking and wealth management. Ex. TD Bank and Citibank.

Commercial and Corporate Banks- These banks provide specialty services to their business clients (Small Business owner to large corporate entities). Along with the day-to-day business banking, these banks provide clients with other services like credit services, cash management, real estate services, employer services and trade finance. Ex. JPMorgan Chase and Bank of America. 

Investment Banks- These banks focus on focus on providing corporate clients with complex services and financial transactions such as underwriting and assisting with merger and acquisition (M&A) activity. They are known as financial intermediaries in most of these transactions. Clients commonly range from large corporations, other financial institutions, pension funds, governments, and hedge funds. Ex. Morgan Stanley and Goldman Sachs.

Investopedia Definition

When it comes to choosing your bank there are a few things to consider:

• What type of accounts are you looking for?
• Are there fees and rates? (Account fees, Interest rates, maintenance fees)
• Do they have a physical location nearby? If not, do they reimburse ATM fees?
• Traditional Bank or Credit Union or Online Bank?
• What do you need from your bank? (Tools, Business Accounts, Investing)
• What kind of digital features do they have? What kind of products or services are they offering? Do they have Mobile banking or are most of their services in person only?
• What are the terms and conditions?
• Are they insured by the FDIC or the National Credit Union Administration?

How to Choose a Bank, Credit Karma

8 tips for choosing a new bank, Bankrate

Online Banks operate solely online with no physical location. They offer similar services as banks with physical locations with all business being conducted online through desktop or mobile app. Because they have less overhead than traditional banks, their fees and interest rates are often more competitive.

Are online banks safe?, Bankrate

A Credit Union is similar to traditional banking in that you can deposit, withdrawal, set up a savings, borrow money and open accounts. The biggest difference is that while a traditional bank is run by its shareholders whose goal is to maximize profit, Credit Unions are controlled by its members, the people who deposit money into it. Credit Unions return all profits to its members usually in the form of more favorable interest rates. Credit Unions run a considerably smaller operation and be more limited compared to traditional banks because of this. 

Bankrate Definition