Banks are better than Building Societies

Building societies and banks have become so alike that many of us (33%) can’t distinguish between them.

The swathe of demutualisations since 1989 has not helped either. But a study by Fool.co.uk shows consumers need to beware of any preconceived ideas they may have to avoid costly mistakes.

Six out of ten people (61%) would prefer to take out a mortgage with a building society than a bank

Four out of ten people (44%) reckon building societies have their best interests at heart

Six out of ten people (62%) would rather discuss their personal finances with a building society than a bank

The findings show that nine out of ten people (94%) deem that banks are motivated solely by profits. Significantly, only one in five people (22%) would rather talk to a bank than a building society about their finances.

A majority of people (61%) also say they prefer mortgages provided by building societies, although one in seven people (15%) dispute this. One in four (26%) agree that banks offer a wider range of products.

However, a third (33%) openly admit they don’t know the difference between banks and building societies. It appears that some 18 years after Abbey National was demutualised, one in six people (15%) still think of it as a building society. One in four people (26%) believe that Alliance & Leicester is still a friendly society too.

Additionally, less than half (46%) know that Cheltenham & Gloucester is a bank, even though Lloyds TSB acquired it in 1994. Meanwhile, one in three people (33%) believe the Woolwich, which was bought by Barclays ten years ago, is a building society. While one in two people (53%) think Bradford and Bingley retains mutual status despite converting to a bank at the turn of the millennium.

David Kuo, Head of Personal Finance at Fool.co.uk, says: “Arguments over whether building societies are better than banks will probably continue until the last mutual society converts to a bank. But that is unlikely to happen for some time given that only one in four people (24%) are in favour of demutualisation.

“However, questions have to be asked about whether consumers have been guided by mis-directed loyalties. Best-buy tables have indicated that banks provide better products than building societies in three key products areas, namely credit card, savings accounts and mortgages.

“It seems that many of us are happy to cling on to the schmaltzy notion that building societies have our best interests at heart. But there is nothing romantic about paying more interest than you need on your credit cards and mortgages, and earning less interest than you deserve on your savings – just oodles of financial heartache.”