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- Private banking is a financial service for people who have a high net worth.
- You have to keep a minimum balance in your accounts to qualify for private banking.
- When choosing a private bank, go for one that offers perks that will benefit your lifestyle.
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What is private banking?
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 bankers look at your bank accounts, mortgage, and other loans. Some private banks also assist you in handling your investments, but not all.
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.
Who qualifies for private banking?
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, PNC Bank only requires $50,000.
Should you become a private banking client?
The pros of private banking
Specialized attention
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 1%, for example, may not seem like a big deal to someone with a couple of 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.
Management fees
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 keep a good chunk of money with the institution. Before enrolling in private banking, be sure you understand the fee structure.
Where should you open a private bank account?
Many large, brick-and-mortar banks offer private banking services. Think of institutions like Bank of America, Chase, JP Morgan, and Wells Fargo.
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.
Personal Finance Reviews Editor
Laura Grace Tarpley (she/her) is a senior editor at Personal Finance Insider. She oversees coverage about mortgage rates, refinance rates, lenders, bank accounts, and borrowing and savings tips for Personal Finance Insider. She was a writer and editor for Business Insider's "The Road to Home" series, which won a Silver award from the National Associate of Real Estate Editors. She is also a Certified Educator in Personal Finance (CEPF).She has written about personal finance for over seven years. Before joining the Business Insider team, she was a freelance finance writer for companies like SoFi and The Penny Hoarder, as well as an editor at FluentU. You can reach Laura Grace at ltarpley@businessinsider.com.Learn more about how Personal Finance Insider chooses, rates, and covers financial products and services »
As a seasoned financial expert with a deep understanding of banking and personal finance, let me delve into the concepts presented in the article, "Our experts answer readers' banking questions and write unbiased product reviews (here's how we assess banking products)." The article covers the intricacies of private banking, offering valuable insights into what it entails, who qualifies for it, and the pros and cons associated with this exclusive financial service.
Private Banking Defined: Private banking is an exclusive financial service tailored for individuals with a high net worth. In this specialized service, clients are matched with private bankers who provide personalized attention, delving into various financial aspects such as bank accounts, mortgages, and, in some cases, investments. The unique feature of private banking lies in the additional perks offered, ranging from discounted loan rates to invitations to exclusive events.
Qualification Criteria: To qualify for private banking, individuals generally need to meet a high net worth threshold, but this varies between banks. For example, Citibank requires a minimum of $1 million across checking, savings, retirement, and investment accounts, while PNC Bank sets the bar at $50,000.
Differentiation from Wealth Management: It's crucial to note that private banking is not synonymous with wealth management, although the terms are sometimes used interchangeably. While private banking focuses on personalized banking services, wealth management extends its scope to comprehensive financial planning, advising, and a significant emphasis on building and managing investment portfolios.
Pros and Cons of Private Banking: The article outlines the advantages and disadvantages of opting for private banking. Pros include specialized attention from a dedicated banker, exclusive perks like sign-up bonuses and discounted loan rates, and tailored business account services for business owners. On the flip side, private banking may come with low-interest rates on savings and higher management fees compared to regular banking.
Considerations Before Choosing Private Banking: The decision to become a private banking client hinges on weighing the benefits against potential drawbacks. Factors to consider include the level of personalization, perks offered, and the specific fee structure of the private bank. The article suggests evaluating whether the discounts and benefits offset the potential opportunity cost of lower interest rates and higher management fees.
Choosing the Right Private Bank: The article provides guidance on selecting the right private bank, emphasizing the importance of evaluating fee structures and perks that align with individual needs. Major brick-and-mortar banks like Bank of America, Chase, JP Morgan, and Wells Fargo commonly offer private banking services. The key is to find a private bank that not only meets financial requirements but also aligns with lifestyle preferences, such as reimbursing foreign transaction fees for frequent international travelers.
In summary, private banking caters to high-net-worth individuals seeking personalized financial services with added perks. The decision to opt for private banking involves careful consideration of individual financial goals, the fee structure, and the specific benefits offered by the chosen private bank.
