Commercial Bank

Commercial banks are the type of bank most people deal with. They earn money mainly by lending at higher interest rates than they pay on deposits, and from fees for services such as account maintenance, card payments and foreign exchange.

Their customers range from individuals with savings accounts and mortgages to small businesses needing working capital loans and large companies requiring complex financing.

For example, a commercial bank might take deposits from thousands of local households and use that money to lend to a business expanding its factory, earning interest on the loan.

The term is often used to distinguish these deposit-taking, lending banks from investment banks, which focus on helping companies raise money in financial markets, advising on mergers and trading securities. Many large banking groups do both, through separate divisions.

Note: Commercial banking refers to the business activity of taking deposits and making loans. It is sometimes used more narrowly to mean banking services for businesses, as opposed to retail banking for individuals.