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- Private banking is a financial service for people who have a high net worth; it comes with personalized private bankers and perks like waived fees or exclusive events.
- You have to keep a minimum balance in your accounts to qualify for private banking, usually ranging from hundreds of thousands of dollars to $1 million.
- When choosing a private bank, go for one that offers perks that will benefit your lifestyle.
- The downsides of private banking are high management fees and a low savings rate on a large sum of money.
- See Business Insider’s picks for the best high-yield savings accounts »
Private banking is an exclusive banking service for customers with a high net worth. The bank matches you with one or more private bankers to help you with your money. You’ll receive more personalized attention than most customers, and the bank may offer other perks, such as discounted loan rates or invitations to special events.
Private banking is not the same thing as wealth management, but the terms are often used interchangeably. Not all private bankers focus on investments, whereas wealth management firms place a huge emphasis on building your investment portfolio. Wealth management also concentrates on financial planning and advising.
With private banking, think of all the services you’d normally receive at a bank, but heightened.
You probably won’t find a bank that only caters to private clients. Many big-name banks just have a separate private banking section of the company, with its own website.
Private banking targets high-net-worth clients, but the amount you need to be considered a “high-net-worth” client varies from bank to bank.
For instance, you’ll need a minimum of $1 million in checking, savings, retirement, and investment accounts to become a private client with Citibank. However, Chase only requires $250,000 to enroll in private banking.
The pros of private banking
When you sign up for private banking, you’re assigned to a banker. You’ll speak with this person each time you need a service.
Not only does this mean you won’t have to wait on hold over the phone to speak with the first available representative, but it also means the banker will become knowledgeable about your specific financial situation.
Perks and discounts
Each private bank includes its own perks for clients, such as large sign-up bonuses, discounted loan rates, or refunds on fees for ATM withdrawals or foreign transactions. Many private banks also throw exclusive events just for private clients.
Business account perks
If you’re a business owner, you may be able to open a personal and business account with the same private bank. Business accounts come with a private banker who is trained to work with businesses.
The cons of private banking
Low interest rates
Private banks require you to keep a lot of money in a combination of accounts and investments. This means you’ll probably keep tens of thousands — if not hundreds of thousands — in a savings account.
Many private banks pay low interest rates on savings. You could earn much more by keeping money in a high-yield savings account at bank that doesn’t offer private banking.
The difference between 0.05% and 0.50%, for example, may not seem like a big deal to someone will a couple thousand bucks in the bank. But if you keep a large amount in savings, you could be leaving thousands of dollars on the table by keeping cash in a low-rate account.
Before opening a private bank account, consider whether the discounts you’ll receive on certain products will outweigh the amount you’ll be giving up by settling for a low interest rate.
Private banking typically comes with higher management fees than regular banking. This may come in the form of monthly service fees for bank accounts (although some banks make it possible to waive these fees). Or a private bank may charge a percentage of your investments — which could come to handsome sum since you’re keep a good chunk of money with the institution. Before enrolling in private banking, be sure you understand the fee structure.
You might be wondering if the bank you currently use offers private banking. You may see your bank’s website has a menu option along the lines of “private banking” or “wealth management.”
When searching for a private bank, find one that has a fee structure you’re comfortable with and offers perks that benefit you. For example, if you’re a frequent international traveler, you may want a private bank that reimburses foreign transaction fees. If you know you’ll be buying a house in the near future, you might go for one that offers discounted interest rates for private clients.
Private banking may be for you if you’re comfortable keeping a large sum of money with a given bank, and if you feel confident it will save you money in the long run. Otherwise, you may want to look at other high-yield savings accounts and investment options.
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