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A bank is a financial institution with a license to hold and lend money. It can provide checking and savings accounts, credit cards, mortgages, auto loans, personal loans, small business loans and more.
A bank can also offer services such as cashier’s checks, money orders, wire transfers, safe deposit boxes, currency exchange, and investing or wealth management. Banks can pick and choose what services they offer and in which states they operate.
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Simply put, a bank is a business: It uses the money customers put into checking and savings accounts to make loans for individuals and businesses. Banks generally profit off the interest from the loans they make and give a portion back to customers as interest in savings accounts.
To operate, a bank has to have a license, or charter, and is overseen by a regulator. In the U.S., there are state and national charters depending on a bank’s reach, and the three main banking regulators are the Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. If a bank treats you unfairly, you can with its regulator or the Consumer Financial Protection Bureau.
You can find financial services outside of banks, such as money orders at the post office, gift cards at retailers and wire transfers and check cashing services at Western Union locations. But when it comes to storing your money safely, only banks have , meaning that you get your money in checking and savings accounts back in the event that a bank goes bankrupt.
Nonbank companies, such as online brokers and neobanks, can partner with banks to offer their customers FDIC-insured accounts, such as checking accounts and cash management accounts.
There are many technical categories — commercial bank, savings bank, etc. — but an easy way to think about banks is to categorize them by their size and whether they have branches or not. Here’s a quick breakdown:
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There’s one other type of bank you might hear about in the news that can impact you and your finances even though you can’t join as a customer:
Here’s an overview of common accounts and loans you can find at banks:
If you run a business or work as a freelancer, you may need accounts tailored to your needs. Banks can provide the following small-business accounts:
A bank provides financial features within accounts as well as independent services, either available on its website, through its mobile app or in person at a branch.
Everyday features and services can include the following:
Other services can include the following:
Banks are not the only places where you manage your money and financial life. Some financial providers are direct competitors to banks with similar accounts, while others offer services that banks normally don’t, such as insurance or tax preparation.
Here’s a list of financial institutions and companies that can compete with banks for your business:
Here’s a list of providers that can offer valuable services to round out your financial needs. Some compete with banks and others can serve you in ways that a bank may not be able to: