Banking in The US and UK: What’s the difference?

The very first notion of banking can be traced back to 2000 BC, when grain loans were conducted between farmers between cities. In the Roman Empire, lenders based in temples started to accept deposits and were able to change money.

However, banking as we know it didn’t start to come into play until the medieval era, when the Bardi and Peruzzi families set up banks in many parts of Europe.

business banking

Banking today mainly takes its lead from the Bank of England, which was established in 1694. The US took on many of the basic principles of early English banking. There are, however, a few differences between the Bank of England and the Federal Reserve.

Spot the difference

Back in 1913, the US government emulated the Bank of England with the Federal Reserve System, intending to take control of the nation’s economy, supervising the banking sector and offering financial services to the US government, depository institutions (financial institutions legally able to accept deposits from customers) and central governments of other countries.

As a general rule, building societies are more of a British thing. The first building society was opened in Birmingham at the Golden Cross Inn in 1775. The society was intended to help produce funds in order to build houses and purchase land. Members of the society would pool their funds in order to pay for houses and land, and once all members had been housed, the society would be terminated.

In their peak, there were thousands of building societies all over England. By the 1840s, members were accepted into the societies who were not home owners, but wanted somewhere to keep their savings. Today, building societies offer a wide range of services, but are most known for mortgages.

Personal banking

The real differences lie within personal banking.

It’s worth noting that in the US, debit card payments and contactless payments are the payment methods of choice. Virtual transactions, such as those conducted over the internet, are prevalent. This may be because, as a general rule, cash machines charge for withdrawal.

Most big stores in the US have their own credit cards, which mean they can render many profits from financing services. This is an option in the UK, but are less common.

While certain cash machines in the UK do charge for cash withdrawals, on the whole it’s free to withdraw money from ATM machines.

Building Societies

Building Societies are the UK version of the US credit unions. The first building society was founded in the UK in 1775, and while they are most known for offering mortgages, they have in recent years become able to offer many of the services banks do.

For the most part, building societies offer cheaper rates when it comes to mortgages.

Given the recent problems with the economy within the UK in the last decade, more and more customers are losing faith with banks – in fact, according to a survey by Yorkshire Building Society, 34% of people have lost faith in the financial sector than during the previous year.

Thanks to the way that they are run, building societies offer more in way of democracy, as they give members a voice thanks to the fact they are member-owned.

Choosing between a bank account or one with a building society depends entirely upon your personal needs. Both establishments offer different merits for personal accounts as well as those for SME’s which is either looking for an account for their capital or for a loan to start up.