What is the difference between banks and building societies

There appears to be a lot of confusion as to what differs between banks and building societies when it comes to how they are run.

There are strict limits on the amount of funding that a building society can raise from the wholesale money markets. Traditionally funds are available to lenders at the cheapest rate possible. For help, go to The Money Advice Service. What is the difference between a building society and a bank? What is a building society? Representative We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits.

Manage consent. Close Privacy Overview This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website.

These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience. Necessary Necessary. Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.

Because banks are listed on the stock market, they are businesses and therefore work in the favour of those who invest in them, specifically their shareholders. Whilst building societies do focus more on financial products like savings and mortgages, they are still able to offer the same services that banks provide, such as current accounts, for example. Nevertheless, for those millennials who are settled in one place and like the community focus that building societies offer, there should be every reason for building societies to be considered as an alternative to banks.

And really, like most things in life, the choice should be focused on which provider is giving the best customer experience — not on whether the provider is a bank or building society. Clearly, more needs to be done to educate millennials on building societies, and part of this responsibility should fall on the sector itself.

To effectively engage a demographic that has grown up in the digital age, surrounded by technology and the internet, more needs to be done to move away from the traditional model.

It should be a priority for building societies to better meet these expectations by providing more engaging digital tools, improving both their internet and mobile offerings. The building society should no longer be seen as a forgotten institution, but one that is considered alongside banks — and that can offer financial products just the same as its business-minded brother. Feel free to email me at editorial.

You must be logged in to post a comment. Below Simon Cadbury, Director of Strategy and Innovation at Intelligent Environments, answers a question many have been asking themselves for years now, what is the actual difference between a building society and your regular bank? The Building Society Enigma Building Societies are one example of organisations that remain a mystery to millennials.

As previously mentioned, the absence of paying dividends to shareholders means that building societies can generally offer higher interest rates.

The fact they are mutually maintained also means that the primary focus is on the owners: AKA the customers. There is a variation in rates between banks and building societies when it comes to offering mortgages.

If you have a small deposit, a building society is likely to be the better option for introductory rates. However, if you have a larger deposit or are looking to remortgage, a bank may be the better option due to their competitive rates for 2-year fixed deals, as outlined in this article by Which? You need to consider additional fees beyond the introductory rate, too.

While an initial low-interest rate may appeal, check the revert rate and arrangement fee. For self-employed people, a building society may also be a better option due to its manual approach to underwriting. As discussed previously, a building society may offer more competitive rates when it comes to paying interest, due to their nature as a mutual institution and not paying dividends to shareholders.

A good comparison website will be able to help you choose the best option for you. Ultimately, it pays to do your research. Taking into consideration the points outlined here, do some investigating into the different types of accounts you might choose. Check the interest rates and any applicable fees, and check customer service levels. Above all, whether you choose a bank or a building society, make sure you are getting the best return on your money.

Check out our post to see how much interest you earn on a million pounds. I have actively made money numerous times simply switching bank accounts for the new customer incentive deals. Predominantly I have switched to banks, but I have also profited from switching to Nationwide Building Society. Some banks and building societies, including Nationwide, also offer customer incentives to recommend friends to switch.