There are many types of bank institutions, including investment banks, central banks, commercial banks, retail banks and credit unions. Most services used by individuals are performed by retail banks, which are open to the public. While many companies use the commercial banking department of a retail bank, they can also use a purely commercial bank to handle their basic banking needs as well.
Commercial Bank Definition
A commercial bank is largely the same as the better-known retail banks most people are familiar with except they focus on the needs of businesses, rather than consumers. Both gigantic corporations and small, mom-and-pop shops can take advantage of the services provided by these banks and commercial bank departments in retail banks. The banking associates at these institutions have the knowledge and experience necessary to help businesses no matter what their size.
Examples of Commercial Banks
While banks such as JPMorgan Chase & Co., Bank of America, Wells Fargo and Citibank all offer departments that specialize in commercial services, a handful of institutions focus mostly on commercial clients. An example of a fully commercial bank is the Bank of New York Mellon Corporation. Generally speaking, these banks are lesser known than retail banks because they are not advertised to the public at large.
Commercial Bank Services
The products and services offered by commercial banks range from basic needs like checking accounts to more complex matters like asset management. When looking for a commercial bank, you need to make sure that it provides an array of services so all your needs can be met at a single institution to simplify things. That being said, it can be beneficial to use multiple banks if you find one bank offers higher rates for your investments while another offers lower interest rates for your loan.
Deposit Account Services
Every commercial bank will offer deposit accounts, which includes such staple banking needs as checking, savings, money market accounts, CDs and other investment accounts. When seeking a commercial bank that offers these services, be sure to ask about their interest rates, minimum balances, service fees, ease of transfers and term length for services like CDs.
Loan and Credit Card Services
At some point or another, most companies will need a loan to start the business, get it through a rough patch, expand the company or buy a new property for the business. A good commercial bank should have experience in handling short- and long-term loans for these purposes. When shopping for a loan, you will, of course, want to ask about the interest rates, but don't forget to ask about loan terms, pre-payment penalties and loan renewal terms as these can often be just as important.
Aside from a property or business loan, you may also want to get a corporate credit card for your business. Just like the loan, you'll want to ask about interest rates available for the bank's credit cards, but also ask about important details like how many authorized users you can have, if there are yearly fees and if the bank offers any perks for their credit cards such as cash back, purchase protection or rental car warranty. These benefits might not apply to all businesses, so be sure to balance the pros of each card when considering the right credit card for your company.
Other Possible Services
Other services commercial banks offer may include currency exchange, business consulting, investment advice, wire transfers, online bill payment, tax return filing, buying and selling securities, insurance services and more.
- Smart Asset: The Different Types of Banks
- Wiki Financepedia: What Is Commercial Bank and Services Provided by Commercial Banks
- Revere Bank: What to Look For In Services Provided By Commercial Banks
- Corporate Finance: What Is a Commercial Bank?
- Federal Deposit Insurance Corporation. "Understanding Deposit Insurance." Accessed Aug. 19, 2020.
- Federal Reserve History. "Financial Services Modernization Act of 1999, Commonly Called Gramm-Leach-Bliley." Accessed Aug. 19, 2020.
- Federal Reserve System. "Large Commercial Banks." Accessed Aug. 19, 2020.
- Bank of America. "Who We Are." Accessed Aug. 19, 2020.
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