9 Types of Banks and Their Benefits

US Federal Reserve, Washington DC (in Spring).
uschools / Getty Images

If you’re like many Americans, your first bank account was likely at a savings bank. As you grow older, your needs — and the types of bank accounts that meet them — will likely change.

When it’s time to choose a bank, you may be surprised to learn how many types of banks there are. In fact, you might find that having different accounts at different institutions serves your needs best. But how do you know which ones are right for you? This guide on different types of banks and the various services they offer can help you decide.

What Are Financial Institutions?

According to federal law, financial institutions include a range of organizations that handle money transactions. The two most popular are banks and credit unions, but there are actually many more specific types within the various categories listed by the Federal Financial Institutions Examination Council. Four of the most relevant to consumers, for example, are federal and state banks, savings banks and savings and loan associations. 

In this overview, GOBankingRates explains nine common types of bank.

1. Central Banks

Central banks don’t offer products like checking accounts and loans to consumers. Instead, they play a role in the economy by regulating the money supply and adjusting interest rates.

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In the United States, the Federal Reserve System — also called the Fed — is the central bank, and it has five primary roles:

  1. Conduct monetary policy
  2. Regulate banks
  3. Stabilize the financial markets
  4. Oversee federal payments systems
  5. Protect consumers

The Federal Reserve System also includes 12 independent districts that operate across the country. Commercial banks can borrow from the Fed after they have exhausted other funding sources.

Good to Know

As a consumer, you do not have the option of borrowing money or doing other types of business directly with the Fed.

2. National Banks

Retail banks offer retail services such as checking accounts, savings accounts, credit cards, mortgages and loans to customers.

National banks are one type of retail bank. They are well-known financial institutions with branches across the U.S. and beyond, such as Bank of America, Member FDIC, and Chase. National banks offer a host of services for both individual and corporate clients, ranging from business loans to extensive ATM networks.

You can typically get any type of retail banking services you want at a national bank — but they might come with higher fees.

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3. Local Banks

Another type of retail bank, local banks focus on developing the needs of a specific community and typically have less than $1 billion in assets. Because local banks support the community — and are aware of the local business environment — they can often extend loans to community businesses or individuals that might have a harder time qualifying at a larger bank.

4. Commercial Banks

A commercial bank’s primary function is to extend loans to businesses. Like all banking institutions, commercial banks accept deposits and use that money to fund loans. And although anyone can deposit money at a commercial bank, you’ll likely use one for business banking.

In addition to general banking services, commercial banks offer services tailored to business needs, like rent and insurance payments. If you don’t need commercial services, you might prefer a national or local bank.

5. Investment Banks

Most consumers won’t need the services of an investment bank, which assists with businesses’ capital transactions. The best investment banks facilitate and provide advice on debt and equity offerings, tender offers, financial restructurings, mergers and acquisitions, divestitures and corporate reorganizations, among other services.

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Generally, only larger organizations, like publicly traded companies, need to conduct these types of investment banking transactions. If this doesn’t apply to you, stick with a consumer bank.

6. Cooperative Banks

Cooperative banks are owned and managed by their members. These banks typically operate in underserved communities and provide banking services to groups of people who may not have access to larger banks. In the United States, credit unions are a type of cooperative bank.

7. Online Banks

Online banks are best for savers who want the highest interest rates. Without physical branches to build and service, online banks can often afford to pay higher rates than brick-and-mortar banks.

Some online institutions offer 24/7 telephone access to a live customer service representative. In addition to the inconvenience of not having branches, online banks can prove difficult to use when you want to make deposits, particularly if it’s a cash deposit. Consider your service needs and whether the high interest that comes with digital banking makes it worthwhile for you.

8. Credit Unions

Credit unions are not-for-profit financial institutions that offer banking services to their members, who are also owners. Members of a credit union have a common bond, such as working for the same employer, attending the same church or living in the same community.

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The structure of a credit union lets profits go back directly to the members in the form of reduced fees, lower interest rates on loans and higher returns on their savings.

9. Savings and Loan Associations

Savings and loan associations — also called thrifts — originally offered two types of services: savings accounts and mortgages. Although some have added checking accounts and other types of loans to their list of services, they focus primarily on real estate financing.

Which Type of Bank Is Best for You?

Because banks exist in a competitive marketplace, you can find many different service options. Chances are, you’ll find what you need at a credit union or one of the three types banks most consumers use: national, local or online.

Compare and contrast the features and benefits of these various types of banks to see which bank is a good fit. And, if you require a variety of services, consider opening accounts at multiple financial institutions, including banks and credit unions.


  • What are the nine types of banks?
    • The nine types of banks are:
      • 1. Central
      • 2. National
      • 3. Local
      • 4. Commercial
      • 5. Investment
      • 6. Cooperative
      • 7. Online
      • 8. Credit union
      • 9. Savings and loan association
  • What are the types of bank accounts?
  • What are the two most popular types of banks?
    • The most popular banks are retail banks – including national and local banks – and credit unions. Online banks are becoming more and more popular, as well.
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Daria Uhlig contributed to the reporting for this article.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.
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