RETAIL BANKING:

A retail bank is a bank that works with consumers and offers basic banking services, including checking accounts, savings accounts, and loans. Retail customers are members of the general public taking care of their personal needs (as opposed to organizations such as governments or businesses that might need more complex services). Understanding retail banking allows you to efficiently carry out every day financial activities.

Types of Retail Banks:

These banks include:

• Large banks: These are often the household names in consumer banking that you’re familiar with; they often have physical branches on busy street corners.
• Small institutions and community banks: These are also brick-and-mortar banks that offer retail banking services. Small banks usually have a smaller U.S. deposit market share than large banks, but they may operate in multiple locations. Community banks focus on providing consumer banking to a particular community; they usually have a smaller footprint and accept deposits and make loans locally.
• Online banks: These banks don't have physical branches where consumers can bank, but are another option for consumer banking, especially if your goal is to minimize fees.

Retail Banking Services:

Retail banks handle financial needs for everyday spending and life events such as buying a home. The products and services that retail banks offer include:

• Bank accounts: These include checking accounts, savings accounts, and money market accounts. Checking accounts often come with a debit card for making purchases and the ability to pay bills online or electronically. Savings and money market accounts pay more interest than checking accounts, which usually offer less interest, but they impose a limit on how often you can withdraw or transfer money from the account.
• Certificates of deposit (CDs): These sometimes pay more than savings accounts, but you usually need to leave your money untouched for at least several months to avoid early withdrawal penalties.
• Credit cards: These are similar to debit cards but allow you to buy things now and pay for them later. They represent a loan you have to pay back, and if you don't pay the full amount listed on your statement within the grace period, you will incur finance charges that depend on the annual percentage rate (APR) of the card.
• Safe deposit boxes: These are storage spaces that keep small valuables such as important documents or valuables within the bank’s walls (so that they can’t be stolen or destroyed in your home).
• Home loans: These products help people buy a home, and can be refinanced. Second mortgages allow borrowers to take out a loan on a property that is already mortgaged using your house as collateral.
• Auto loans: These loans help people buy a car, and can also be refinanced.
• Unsecured personal loans: These products can be used for any purpose and do not require you to pledge collateral. Revolving lines of credit (including credit cards) allow borrowers to spend and repay repeatedly without applying for a new loan

Costs of Retail Banking:

Banks exist to make a profit, and credit unions also need to bring in revenue to pay the bills. The most basic way that retail banks earn money is to make loans with customer deposits and charge interest on those loans. At the same time, it pays customers interest on their deposits and usually keeps any leftover earnings as profits.

However, the reality of how retail banks earn money is a bit more complex; they also charge service fees that boost their bottom lines. For example, banks may charge monthly maintenance fees, overdraft fees when you spend more money than you have available in your account, and modest fees to print.