Not all banks are exactly the same. There are commercial banks, savings banks,
savings and loan associations (S&Ls), cooperative banks, and credit unions. Today
they offer many of the same services, but at one time, they were very different from
one another.
Commercial banks originally concentrated on meeting the needs of businesses. They
served as places where a business could safely deposit its funds or borrow money
when necessary.
Many commercial banks also made loans and offered accounts to individuals, but they
put most of their effort into serving business (commercial) customers.
Savings banks, S&Ls, cooperative banks, and credit unions are classified as thrift
institutions or “thrifts,” rather than banks. Originally, they concentrated on
serving people whose banking needs were ignored or unmet by commercial banks.
The first savings banks were founded in the early 1800s to give blue-collar workers,
clerks, and domestic workers a secure place to save for a “rainy day.” They were
started by publicspirited citizens who wanted to encourage efforts at saving among
people who did not earn much money.
Savings and loan associations and cooperative banks were established during the 1800s
to help factory workers and other wage earners become homeowners. S&Ls accepted
savings deposits and used the money to make loans to home buyers. Most of the loans
went to people who did not make enough money to be welcome at traditional banks.
Credit unions began as a 19th-century solution to the emergency needs of people
who were unable to borrow money from traditional lenders. Before the opening of
credit unions, ordinary citizens had no place to turn when they faced unexpected
home repairs, medical expenses, or other emergencies. Credit unions were started by
people who shared a common bond such as working in the same factory, belonging to
the same house of worship, or farming
in the same community. Members pooled their savings and used the money to make small
loans to one another.
Although there are still differences between banks and thrifts, they now offer many
of the same banking services to their customers. Most commercial banks now compete
to make car loans.
Many thrift institutions have begun to make commercial loans, and some credit unions
make loans to home buyers.
