Building Societies v Banks

In the UK there are two main financial institutions; Banks and Building societies. Whilst a majority of people in the UK use banks, building societies are becoming more actively competitive with banks for financial services, focusing mainly on mortgage lending and deposit accounts. As of 2007 there were 60 building societies in the UK with total assets exceeding £305 billion.

The primary activity of a bank is to act as a payment agent for customers, and to borrow and lend money. However, as banks rely on paying dividends to shareholders they are constantly pushed to meet profit margins each year. The key difference between a building society and a bank is that building societies are owned by its members, meaning that they work solely for their customers. There is a much greater sense of loyalty between building societies and their customers and this inherent trust is rewarded as customers are allowed to have a say in the way the society is run at the end of each year.

Whilst building societies can offer phenomenal savings rates, the high street is catching up, with some accounts offering up to 8.5% interest if you are in the black. If you choose to accrue your capital in a building society access to your finances is not as easy as it might be should you have a conventional bank account. With the increase in people travelling abroad this is something to take into consideration; it’s difficult to access your money if you are in Bahrain and your only branch is in Barking!

Financial institutions know that once the original relationship is formed, it is difficult to break away and a majority of consumers will return to the same institution when they need new financial services. Banks and Building societies have been tussling for our custom for years, whether it is interest rates, consumer satisfaction or reputation, neither side is going to give in. 

Visit the Alliance & Leicester website to find out more about savings accounts.