Building societies or banks: what you need to know

Print Friendly

Thanks to the recession, your average consumer in the UK can boast considerably better financial knowledge than a decade ago. The growth of online comparison websites also means that people are much more aware of their options, and how much money they can save simply by doing a little research.

However, many consumers are still confused about one thing: the difference between a bank and a building society. What is it exactly that makes a bank different from a building society – and should we be choosing one over the other?

The difference between a bank and a building society

Conventionally, the main difference between a bank and a building society is its shareholders. Banks are listed on the stock market and are owned and run for the benefit of its shareholders. These shareholders are paid dividends from the bank’s profits.

Conversely, as this article from consumer website Love Money explains, a building society has no external shareholders. People who hold mortgages and accounts are counted as building society members who get to vote on its actions.

But this traditional divide between banks and building societies was turned on its head during the economic reforms of the 1980s. These reforms made it possible for banks to offer mortgages to consumers, a domain that was previously held by building societies. Simultaneously, building societies were allowed to offer traditional banking products, like current accounts, as well. Some building societies, like the ill-fated Northern Rock, eventually demutualised into banks.

Today, the primary difference between a bank and a building society is how they borrow money. Banks depend on wholesale money markets for their funds. Building societies also borrow money from these wholesale markets, but aren’t allowed to get more than half of their funds in this way. Since the credit crunch, both banks and building societies have had to rely more strongly on savers’ deposits too.

So while banks and building societies have essential differences, their range of consumer offerings is largely similar. Whether you choose to join a bank or a building society will depend on your particular financial circumstances, and the deals offered by each at any given time.

Joining a building society

If you’re thinking about joining a building society, it’s important to consider this decision in the same way you would joining a bank. Think about what you want – for instance, a high interest savings account, a new current account or a first-time mortgage – and look for providers who offer the best rates for you.

Financial comparison sites like Go Compare and Money Supermarket are always a good starting point. But if a particular building society catches your eye, it’s a sensible idea to look at their website directly as well, as some offers may not be advertised on comparison websites.

Additionally, don’t just assume that your money is safer in a building society. Check that the institution you favour is FSA-regulated and that your money will be covered by the Financial Services Compensation Scheme, which insures deposits up to £85,000 per person and investments up to £50,000 per person.



The contents of this article are for reference purposes only and do not constitute financial or legal advice. Independent financial or legal advice should be sought in relation to any specific matter. Articles are published by us without any knowledge or notice of the circumstances in which you or anyone else may use or rely on articles or any copy of the information, guidance or documents obtained from articles. We operate and publish articles without undertaking or accepting any duty of care or responsibility for articles or their contents, services or facilities. You undertake to rely on them entirely at your own risk, and without recourse to us. No assurance of the quality of articles is given or undertaken (whether as to accuracy, completeness, fitness for any purpose, conformance to any description or sample, or otherwise), or as to the timeliness of the publication.


The following two tabs change content below.
Hello ... I am the Creative Director and Website Editor for Silversurfers and manage all the social media too. I hope you find the features and articles we have shared with you of interest and relevance. Please feel free to comment below and share your thoughts with us ... I hope you enjoy Silversurfers and all that we offer ...

Latest posts by Silversurfers Editor (see all)

Not a member?

Join the silversurfers community today! It's free, easy to do, and is packed full of features and amazing offers!

Join the community!
Click here if you have forgotten your password

Community Terms & Conditions

Content standards

These content standards apply to any and all material which you contribute to our site (contributions), and to any interactive services associated with it.

You must comply with the spirit of the following standards as well as the letter. The standards apply to each part of any contribution as well as to its whole.

Contributions must:

be accurate (where they state facts); be genuinely held (where they state opinions); and comply with applicable law in the UK and in any country from which they are posted.

Contributions must not:

contain any material which is defamatory of any person; or contain any material which is obscene, offensive, hateful or inflammatory; or promote sexually explicit material; or promote violence; promote discrimination based on race, sex, religion, nationality, disability, sexual orientation or age; or infringe any copyright, database right or trade mark of any other person; or be likely to deceive any person; or be made in breach of any legal duty owed to a third party, such as a contractual duty or a duty of confidence; or promote any illegal activity; or be threatening, abuse or invade another’s privacy, or cause annoyance, inconvenience or needless anxiety; or be likely to harass, upset, embarrass, alarm or annoy any other person; or be used to impersonate any person, or to misrepresent your identity or affiliation with any person; or give the impression that they emanate from us, if this is not the case; or advocate, promote or assist any unlawful act such as (by way of example only) copyright infringement or computer misuse.

Nurturing a safe environment

Our Silversurfers community is designed to foster friendships, based on trust, honesty, integrity and loyalty and is underpinned by these values.

We don't tolerate swearing, and reserve the right to remove any posts which we feel may offend others... let's keep it friendly!

More Finance

Going to university: a guide for parents and grandparents Oxford, England
Going away to university is an extremely exciting time in a young person’s life, but it’s...
Resources for DIY wills Person Hand Over Last Will And Testament Form
Creating a last will and testament is an important piece of admin many of us avoid dealing with...
Holiday insurance for disabled travellers Disability chair at awimming pool
You're planning a holiday and all you want to be thinking about is packing your sun cream and...
The best retirement budgeting tips on the web Writing retired and enjoying life on an application form concept
Retirement is a wonderful new chapter in life where your time is your own and you're free to...
Shopping Smart With Voucher Codes Shopping online
With the global recession seemingly never ending, it’s no surprise that consumers have had to...
Where to follow economics news Businessman Reading Latest News
Since the financial crisis of 2007-08, economics news has enjoyed a bit of an upturn in...
Easy tools to help you manage your spending Delicious food
Controlling your expenditure can be tricky, no matter how long you've been at it. Most people...
The best money blogs Www. Written In Search Bar
From stocks and shares to real estate or fluctuating interest rates, the world of finance is a...
Travel insurance for cancer patients 'Cancer' highlighted in green
If you or someone you love has just been diagnosed with cancer or is recovering after a round of...
Finding travel insurance for diabetics diabetes1
As with many on-going illnesses diabetes is not only something you need to deal with in your...
Comparing travel insurance policies: the best resources to use bigstock-Travel-Insurance-25334408
These days it’s easier than ever to get an travel insurance quote online – price comparisons...
Best Travel Insurance Guide for Over 50 & 65s bigstock-Travel-Insurance-Sign--48008171
The last thing you want to think about when you're planning your holiday is the fact that things...