Banks
Banks are financial institutions that offer products and services around money. Its most basic offer is accepting deposits from clients and keeping that money stored and safe so that the client can use it at their convenience. Other products include loans, investments, and credit cards.
Most banks make money through fees and interest. When a client opens an account, they agree to pay monthly or yearly fees to keep the account open. They also agree to pay fees for transactions such as transfers to other accounts, cash withdrawals, or writing checks. As for interest, when a client takes out a loan, they commit to paying back the loan amount, plus an extra interest rate. Something similar happens with credit cards.
Types of Banks
The Central Bank of the Philippines lists 7 types of banks on its website. Here’s a brief description of each type for your reference:
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Universal Banks: These offer the widest range of products and services and are authorized to engage in both commercial and investment banking. For this, a universal banking license from the Central Bank is required. Most of the largest banks in the Philippines are universal.
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Commercial Banks: These are banks that primarily offer accounts and loans. Their license type doesn’t allow them to engage in investment banking.
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Thrift Banks: This type of bank offers similar services to commercial banks, but is primarily focused on savings accounts.
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Rural Banks: These banks provide basic services to rural communities and are typically small operations owned by private individuals.
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Cooperative Banks: These are also mostly in rural communities, but are owned by a cooperative society and primarily service the members of said society.
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Islamic Banks: These specialize in offering services that comply with Shariah, the Islamic law. For example, they aren't allowed to charge or pay interest, as it is considered usury.
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Digital Banks: This type of bank is newer, as the Central Bank only started granting digital banking licenses in 2020. It’s composed of banks that were established completely online and operate without any brick-and-mortar locations.
Outside of these 7 types, banks can also be separated into local and international banks. The largest banks in the Philippines are almost all local, with some of them dating back 100 years or more.
Finally, another distinction can be made between private and public banks. Two of the largest Filipino banks are government-owned. These differ from private banks in that they intend to boost the economy in a particular sector, and not make a profit.
How to Choose a Bank
When choosing a bank to open an account with, the first thing you need to consider is what you need the bank to do for you, as this will determine what type of bank is right for you. Some banks, like the rural, cooperative, or Islamic ones, only apply to you in very specific situations. But others can be useful depending on what you need.
If you want to save money, a thrift bank might be a good option, and if you don’t want to ever go to a branch, a digital bank might be best. But if you want to have plenty of options on how to use your bank, then a universal bank is your best choice.
After that, there are a few key characteristics of banks and their products to consider:
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Fees: this is how many fees they charge and how much each one costs will determine how economical or expensive having an account in that bank is. Ideally, you want the bank with the lowest fees, both in number and amount.
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Accessibility: consider how necessary it is to go to a physical branch to do transactions and how close the branches are to you. Also, location and availability of ATMs. Whether it is good or bad to have to go to a branch depends on personal preference, but ideally, you’d want branches and ATMs to be conveniently located for you.
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Mobile banking: this is what operations you can do online and how long they take to do. Usually, the more operations you can do on your phone and the easier and faster it is to do them, the better.
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Interest rates: this refers to both loans and savings. Ideally, you’d want low interest on loans but high interest on savings, because you won’t have to pay as much to the bank and you’ll receive more money in your savings account.
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Customer service: consider how quickly and thoroughly they respond to inquiries, both online and in person, and how satisfied clients are with the resolution to their issues. For this, you can talk to family, friends, and acquaintances to know their opinions, but you can also read reviews online to get more information.
In Credilemon we give you a list of banks with their products and services so you can kickstart your decision process with a comparison all in one place. After you narrow down your options, you can then head to the websites of the specific banks to get more details.
Once you choose a bank, consider starting with the most basic product they offer, usually a checking account, and trying it out for a while to make sure you like the bank and it works as you expected. Once you’re sure, you can hire any other products you need.
