A Penny Saved

What makes a Bank a Bank?

Banks are generally for-profit.  What this means to you is that a bank will generally have the business’ best interests in mind along with yours.  What it also means is that most banks will not give out a higher interest rate then they have to and will try and get as high of a interest rate on a loan as possible.  The more the bank makes, the more the CEO and shareholders/owners make in dividends.

A bank is just like any other private company.  It has owners/shareholders that own it.  While some of the customers may be shareholders, they are not required to be.  Because banks are for-profit, they are subject to taxes, but have fewer regulations than a Credit Union does.

Anyone, anywhere can be a customer of a bank.  Many of the pfbloggers around here have accounts in ING Direct, HSBC, and Emigrant Direct, and I’d bet they don’t have a local branch around the corner. With no constraints on who can be a customer, many banks have thrived and become nationwide and even worldwide brand names. Banks also have fewer regulations on what they can own and use as investments.

There are many benefits to Banks and Credit Unions. In each and every person’s case, you should pick the financial institution that you are most comfortable with and that treats you best.  Become educated about the different fee structures and the rates of your local institution before making a choice and you’ll be much happier with them over the long run.

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