Building societies offer many of the same financial products as banks and are run in the best interests of their customers.
A building society is a mutual organisation that offers a range of financial products and services including home loans, savings accounts, transaction accounts and credit cards. Unlike banks, however, building societies are run to benefit their customers, who are often referred to as members. Instead of increasing profits for shareholders, building societies instead reinvest their profits into offering better value for money to their members.
How does a building society work?
As touched on above, the aim of any major bank in Australia is to increase profits for its shareholders. But as mutual organisations, building societies are collectively owned by their members - the people they create products to serve.
When you open an account with a building society, you become a member of that society. A small membership fee, for example $2 or $10, often also needs to be paid. Once you’ve become a member, as well as enjoying all the benefits of your banking account you get to have a say in how the society operates, for example by voting at annual general meetings.
Any profits the building society makes can then be passed on to members in the form of improved products and services. And there’s no need to worry about the security of your money, as building societies must satisfy the same regulations and rules as a bank.
The Australian Prudential Regulation Authority features the following six building societies on its list of authorised deposit-taking institutions:
- B & E Ltd
- Big Sky Building Society Limited
- Greater Bank
- Maitland Mutual Building Society Limited
- MyState Queensland Ltd
- Newcastle Permanent Building Society Limited
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Building societies are also Authorised Deposit-Taking Institutions (ADIs) and so follow the same regulations as the banks and are regulated by the same bodies. It's deposits are covered by the Government Guarantee.
How do I compare building societies when finding a savings account?
Keep the following features in mind when comparing the merits of different building societies:
- Products and services. Compare the range of products on offer from each building society to see if it has the products you need. Does it provide home loans, personal loans, transaction accounts, savings accounts, credit cards, insurance, financial planning services and more? You can also look closely at the nitty gritty of each product the building society offers, such as whether or not it offers flexible home loan repayment options to suit your needs.
- Fees and charges. Compare the fees and charges that apply to the products the bank offers. For example, will you need to pay an annual fee on your credit card, or will you incur a penalty for paying off your home loan early?
- Online and mobile banking options. As an increasing number of Australians do their banking online via their computer or smartphone, it’s vital that you investigate the online and mobile banking services each building society provides. How easy is the service to access and use? Can you perform all your regular transactions online?
- Membership requirements. Check to see whether there are any special requirements you have to fulfil to become a member, for example paying a membership fee.
- Customer support. How can you access customer support and during what hours? Is there an online help section as well to answer any questions you might have?
- History and reputation. Finally, consider how long the building society has been in operation and whether or not it has a solid reputation for providing quality products backed by excellent customer service. You can seek out online reviews, customer satisfaction surveys and ask family members and friends for their recommendations.
What are the pros and cons to banking with a building society?
- Run to benefit you. Rather than being run to benefit the bottom line of shareholders, building societies invest any profits back into providing better products and better value for money to customers.
- More than just a number. Many building societies pride themselves on providing a more personalised service to customers than the banks, and members also get to have a say in how the society is run.
- Value for money. Due to their member-owned approach, building societies are often able to offer better value for money to their customers.
- Not the same range of products. Building societies don’t offer access to quite the same range of products and services as the big banks. For example, Australia’s big four banks all offer online share trading and investing platforms to customers.
What are the risks?
The biggest risk when doing your banking with a building society is failing to shop around to find a society that meets all your financial needs. While choosing a building society because there’s a branch just down the street or because you’ve had an account with them for years can seem like the easiest option, shopping around for a better deal can save you a great deal of money.
Any other risks associated with building societies are also associated with any bank, such as borrowing more than you can reasonably afford to repay or keeping your savings in an everyday transaction account instead of a high-interest account.