You may have heard of the different types of banks, such as investment banks or commercial banks. Different types of banks focus in different areas of business. There are an assortment of names for banks and one bank can function as some different types of banks. Here are the fundamentals for each type of bank.
Retail banks work with consumers or retail customers. They deliver the basic banking services such as checking and savings account, safe deposit boxes, mortgages, and auto loans. These are the banks that you most often see in cities on busy intersections. Retail banks are the ones you perhaps use for your personal checking account.
Retail banks can often serve businesses as well. This means they can also serve as a commercial bank. Commercial banks is a bank that works with businesses. Small and large businesses use commercial banks for banking needs. With a commercial bank you can have the simple account, such as savings and checking. Commercial banks also allow lending money for capital purchases, lines and letters of credit, payment and transaction handling, and foreign exchange. Commercial banks can serve individuals, as well as businesses, which leads them to running as a retail bank.
Investment banks are used to help establishments use investment markets. Investment banks do not take customer deposits and mainly work in the investment market. Although, some large investment banks can serve as commercial banks or retail banks.
The organization that is responsible for handling bank activity is the central bank. The Federal Reserve is the central bank. The central bank in the United States has three ultimate goals. The ultimate goals are to conduct financial policy, oversee and adjust financial firms, and provide financial services. Central banks usually do not get contact with most customers. In the background, large financial firms usually work with the central bank.
A credit union is often confused with credit banks. But they are different even though they can offer related products and services. A credit union is an organization that is owned by the customers. They are nonprofit organization that go all-out for service over profitability. Credit unions still make financial decisions, collect income, pay salaries, and compete with other organizations. Credit unions limit their offerings to people who have a common connection. This connection could be a workplace, religion, or any other type of bond. In conclusion, credit unions get money from its customers and loans that money to other customers.
Banks that you mainly use on the Internet are online banks. They give you the opportunity to have more choice and flexibility. You can do everything with an online bank, including the following: open accounts, fun accounts, transfer money, online billing services, get loans, and much more.
Specialized banks that are created to encourage affordable homeownership are Savings and Loans banks. They are banks that were created to specialize in home mortgages.
Now that you know the different types of banks, how do you choose a bank? First, it is important you figure out what you need from a bank. Once you figure out what you need, you can look at the different types and find what is best for you. You need to figure out what your banking activities are in order to find the best bank for you.