Types of banks

Retail Bank

Retail banks provide basic banking services to the general public, inluding:


  • Checking and savings accounts
  • CDs
  • Safe deposit boxes
  • Mortgages and second mortgages
  • Auto loans


Commercial bank

Commercial banks handle banking needs for large and small businesses, including:


  • Basic accounts such as savings and checking
  • Lending money for real and capital purchases
  • Lines of credit
  • Letters of credit
  • Lockbox services


Investment banks

Investment banks help organizations use investment markets.

For example, when a company wants to raise money by issuing stocks or bonds, an investment bank helps them through the process. Investment banks also consult on mergers and acquisitions, among other things.


Investment banks primarily work in the investment markets and do not take customer deposits. However, some large investment banks also serve as commercial banks or retail banks.

Central bank

A central bank is an organization responsible for managing banking activity. Within the USA the central bank is the Federal Reserve, or 'the Fed'. Other countries have central banks as well. Their roles are similar, but they may have different objectives.

Credit union

A credit union is an institution owned by the “members” or customers. Contrast this with banks where the customers are just customers. Banks answer to profitability – usually shareholders own a bank and expect financial performance from bank management.


Credit unions are nonprofit organizations that strive for service over profitability. Note that this does not mean they are charities. Credit unions must make sound financial decisions, collect revenue, pay salaries, and compete with other institutions.

Online banks

Online banks are banks that you primarily (or exclusively) use on the Internet.

Online banks allow you to have more choice and flexibility. You can do things on a computer, and you often get more competitive rates from online banks. They claim that they do not have the overhead and expenses associated with brick-and-mortar banks, so they can pass the savings on to you.


Online banks allow you to do everything online, including

Savings and loans

Savings and Loans (S&L's) are specialized banks created to promote affordable homeownership. After World War II, the government helped build the Savings and Loans industry by insuring deposits on savings accounts. This encouraged people to save their money, despite federally-regulated low interest rates.

Savings and Loans are banks that were created to specialize in home mortgages.