Private banking refers to a range of banking products and services that are offered to certain clients, typically individuals who have a high or ultra high net worth. These aren’t necessarily free-standing banks. Traditional banks can offer access to private banking alongside personal, small business, commercial, and corporate banking services.
When you open a private bank account, you can enjoy certain benefits, including access to a dedicated banker. Whether private banking is something you need or want, however, can depend on your financial situation and goals.
Here, you’ll learn more about private banking and whether it might be right for you, today or in the future. Read on to find out:
• What is private banking?
• How does private banking work?
• What are the minimum requirements for private banking?
• What is the difference between a private and a public bank?
What Is Private Banking?
Private banking describes a division of retail banking that caters to individuals who have significant assets. Again, that typically means high net worth individuals who have substantial disposable assets.
The private banking minimum requirements can be quite steep. For instance, you may need anywhere from $50,000 to $10 million to enroll in private banking, depending on the bank.
Banks, brokerages, and other financial institutions can offer private banking as a concierge service to people whose needs go beyond regular personal banking. As noted, you may need to meet minimum account-opening requirements in order to take advantage of private banking features.
Private banking is sometimes grouped together with wealth management, though they mean different things. While private banking can encompass a variety of banking services, wealth management deals largely with investing and financial planning.
A dedicated banker can help with your private bank account while a wealth management advisor might offer advice on retirement planning or estate planning.
Quick Money Tip:Typically, checking accounts don’t earn interest. However, some accounts will pay you a bit and help your money grow. An online bank account is more likely than brick-and-mortar to offer you the best rates.
How Does Private Banking Work?
The exact details of what’s included with private banking typically depends on the bank. Generally speaking, private banking is designed to provide a more personalized banking experience that’s focused on your financial goals, needs, and situation.
For example, some of the features and services you might have access to include:
• Premium checking, savings, money market, and certificate of deposit (CD) accounts
• Foreign currency exchange services
• Specialized financing
• Real estate lending
• Specialty services for people who work in specific industries
• Interest rate discounts on loans
• Enhanced interest rates on deposit accounts
• Fee waivers
• Investment advice, if your private banking service extends to wealth management
• Estate, trust, and insurance planning
• Business management services
• Charitable giving services
• Personalized customer service
In other words, you’re getting much more than just a checking and savings account when you sign up for private banking. However, all of that added value may come at a higher cost, as banks may charge more for things like monthly maintenance fees if you don’t maintain a certain minimum balance.
Recommended: 5 Ways to Achieve Financial Security
Private Bank vs Public Bank
The term “public bank” can refer to banks that are owned by government entities rather than shareholders. Public banks operate to serve or fulfill a mission that’s designed to benefit the greater good. For example, a public bank might operate in order to generate revenue that could be used to pay for public works projects like new roads or schools.
When you’re talking about private banking and how it compares to other forms of banking, it’s more appropriate to use traditional banking as the benchmark. Traditional banking is the kind of banking you might use everyday. For example, you’re using traditional banking services when you open a checking account at a branch of a local bank.
Private banking, as described above, typically offers more personalized service and a suite of offerings in addition to the usual checking and savings accounts.
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Who Are They For?
Traditional banking and private banking can meet very different needs. In terms of which one is the better option, it depends on your personal situation.
Traditional banking is designed for people who:
• Are looking for a safe, secure place to keep their money
• Need basic money management tools, like checking and savings accounts
• Want to have access to their money through online and mobile banking, branches, or ATMs
• Don’t necessarily need wealth or asset management services.
Meanwhile, private banking is suited for people who:
• Need more than just a checking or savings account
• Want to work one-on-one with a banker, financial advisor, or team of financial professionals
• Have sufficient assets to qualify for opening a private bank account
• Are interested in comprehensive financial planning services
The biggest distinction is the range of services offered. Private banking, overall, is substantially more comprehensive in its approach to money management.
Banking Services
As discussed, private banking can span a much wider range of banking and financial management services. For instance, you might be able to meet with your private banker or wealth manager to open a new checking account, establish a trust, and create a plan for tax-efficient charitable giving.
At a traditional bank, you’re more often doing basic things like opening new accounts, applying for loans, or depositing funds.
Banking Access
Private banking and traditional banking may both offer the same degree of access, in terms of depositing or withdrawing money or paying bills. You might be able to manage your accounts online, via mobile banking, at a branch, or an ATM. There may, however, be different limits on how much you can withdraw, spend, or deposit each day with traditional vs. private bank accounts.
Banking Fees
Both traditional and private banks can charge fees. Some of the most common fees include monthly maintenance fees, overdraft fees, excess withdrawal fees for savings accounts, and returned payment fees. Opting for private banking doesn’t mean you’ll escape those fees, though some banks do offer fee waivers when you meet a higher minimum balance requirement.
Private vs Traditional Banking: Pros and Cons
Both traditional and private banks have advantages and disadvantages to consider before opening an account. Here are some of the main pros and cons of using private banking vs. traditional banking.
| Private Banking | Traditional Banking | |
|---|---|---|
| Pros | Comprehensive banking services that can include wealth management, estate planning, and insurance planning Private banking clients may have access to a dedicated banker, allowing for a more personalized banking experience Private bank accounts can include premium features, such as optimized interest rates, fee waivers, and specialty banking services | A traditional bank can offer a safe, secure way for people to manage the money that they spend and save Traditional banking is easily accessible for most people, with relatively low minimum-deposit requirements in most cases You might be able to unlock added features, such as relationship rates or interest rate discounts for accounts in good standing |
| Cons | Minimum investment requirements may be high Banks may charge higher monthly maintenance fees if you fail to meet minimum balance requirements | Traditional banking doesn’t offer as many bells and whistles Traditional banks can charge steep fees, making online banks a more attractive choice for some people |
Many banks that offer traditional banking services also offer private banking services. For example, some of the biggest banks that have both traditional and private banking include:
• Bank of America
• Chase
• Citi
• U.S. Bank
• Wells Fargo
These are all well-known names in the banking industry. While online banks have yet to dive into the private banking pool, it’s possible that as the online banking industry expands you may see more premium products and features offered.
Recommended: Different Ways to Earn More Interest on Your Money
Private Banking Minimum Requirements
As mentioned, private banking is generally available only to people who can meet certain requirements. Financial institutions that offer private banking services may use net worth or liquid assets as the baseline for determining who can open an account. There may be additional minimum deposit requirements you’ll need to meet once you open your account.
Not all private banks state upfront the amount of money needed to be considered a private client. Typically, the figure is around $250,000 in banking assets. However, it can be more or less.
• Chase offers private client banking to those with a daily average of $150,000 in Chase investments and accounts.
• At Citi, Citigold private clients must keep at least $1,000,000 in eligible linked deposit, retirement and investment accounts.
While you can open traditional checking accounts or savings accounts online, that usually isn’t an option for private banking. Instead, you might be directed on the bank’s website to call or send a secure message to request an initial meeting with a private banker to discuss your eligibility. The banker may ask for information about your income, assets, and debt to determine whether you meet the net worth guidelines.
If you get the green light to open a private bank account, you’ll need to fill out the appropriate paperwork, which is no different from opening any other bank account. You’ll also need to make a minimum deposit. Depending on how much money you’re depositing, you may need to obtain an official check from your current bank or brokerage or arrange a wire transfer.
The Takeaway
Private banking isn’t necessarily right for everyone, and if you don’t currently have a high net worth, you may not need these services. However, it’s a good idea to understand what private banking involves if you’re focused on building wealth and eventually want to take your banking to the next level.
3 Money Tips
- Typically, checking accounts don’t earn interest. However, some accounts will pay you a bit and help your money grow. Online banks are more likely than brick-and-mortar banks to offer you the best rates.
- If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt; rates have recently been climbing into the double-digit range, so try to eliminate that ASAP.
- When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
Photo credit: iStock/mapodile
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SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
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