Commercial bank

A for-profit company that takes deposits, makes loans and offers everyday accounts such as checking, savings and credit cards to the public.

What it means

Commercial banks are the most common kind of bank in the U.S. They are owned by shareholders, range from small community banks to huge national chains, and earn money mainly from the gap between what they pay on deposits and what they charge on loans, plus account and service fees.

Deposits at a commercial bank are protected by FDIC insurance up to $250,000 per depositor, per insured bank, per ownership category. Compared with credit unions and online banks, large commercial banks tend to pay lower rates on savings and charge more fees, but they usually offer the widest set of products and the most branches and ATMs.

Example

Suppose a checking account at a large bank charges a $12 monthly maintenance fee unless the customer keeps a minimum balance or sets up direct deposit. Missing the waiver every month would cost $144 a year, which is why fee waiver rules are worth reading before opening an account.

How it’s used

Opening a first checking or savings account
Getting a mortgage, auto loan or credit card from one institution
Handling cash deposits, cashier’s checks or wire transfers in person

Strengths and weaknesses

Strengths

Large branch and ATM networks in many areas
Broad range of products under one roof
FDIC-insured deposits
Polished mobile apps and in-person help

Weaknesses

Savings rates are often lower than at online banks or credit unions
Monthly maintenance, overdraft and other fees can add up
Shareholder ownership means profits go to investors, not customers

Good to know

Compare the fee schedule and waiver requirements, not just the advertised perks.

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.