Tuesday, June 26, 2012

What is Personal Banking?

By Walter Lashomb


What is Personal Banking?

"Personal banking" means any service that a bank offers to an individual. The obvious examples of this type of service are savings and checking accounts. These services also include loans, CDs, credit cards, retirement accounts, and home mortgages. Commercial banking, by contrast, refers to the services offered to businesses.

Personal banking is generally done through retail banks. Retail banking refers to any and all services offered directly to the public by the bank. These can include, but are not limited to personal banking services. Many retail banks also offer commercial banking services like health savings accounts, payroll services, and business loans. Both national banks and local banks can fall under the category of retail banks.

Private banking is available to select individuals. These services are generally intended for clients with large assets. It's called "private banking" because each account holder has a personal, private account manager. Private banking includes the same services as retail personal banking with a few additional services. These generally include wealth management services such as estate planning, investments, and tax assistance.

Other institutions may also handle some personal banking services. Your investment firm or insurance company may also offer home loans and savings accounts. In order to compete, retail banks have added financial services like investment and insurance plans for their customers.

In brief, if it's a service that an individual may need, it's a personal banking service. Private and retail banks offer personal banking services, but are not synonymous with the term "personal banking." Indeed, other institutions offer personal banking services.

Look at the types of banking you intend to do when making a decision on what type of institution to do business with. Private banking usually involves annual fees, but for those with complex financial needs, they can be worth the additional cost. Retail banks, on the other hand, offer the services that most people need, often for reduced or no cost.

There are other things to consider when choosing a retail bank, though. While most retail banks offer some of the same services, they will have some differences. Choose a bank that offers all the services you need. That isn't limited to just the type of service you might want, such as personal checking or a home loan. Services like online banking, check and credit cards, automatic transfers or bill payment, and overdraft protection are also important things to look for. Finally, make sure the institution is a member of the FDIC. This insures that your losses will be covered if the bank dissolves.




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