Group Banking

Group banking is a plan offered by banks that generally provides incentives for groups, such as employees at a company, if the group establishes a banking relationship with the institution. For example, a bank may offer loans or other banking products to all employees of an organization through a promotion. Or, a bank might offer employees of a large employer special perks if they open a checking account with direct deposit, lower rates on home-equity loans or mortgages, or higher interest rates on CDs.

Potential incentives for group banking can include lower interest rates, lower fees and discounts. Members of a group banking arrangement will usually have access to better perks than they would otherwise be able to obtain on their own. Employees are usually able to choose the account types and financial products that meet their individual needs. Some banks may offer group banking members reward points that can be redeemed for travel, gift cards, cash or merchandise.

Some other benefits of group banking plans include a single point of contact for the group, and a bank contact who is generally more knowledgeable of the group's plan and needs. This leads to a more personalized banking experience for all members of the group. Banks may offer group members seminars on personal finance topics, or one-on-one financial advice to help them reach their financial goals.

Employers benefit from offering their employees group banking plans because many employees consider group banking an employment benefit on a par with paid time off, sick leave, health insurance and retirement savings plans. Therefore, partnering with a bank to offer group banking can help businesses attract and retain high-quality talent. Group banking plans can allow employers to expand their employee benefits package for minimal additional cost.

Employees are usually not required to sign up for group banking benefits offered by an employer, but in many cases, the perks of signing up for group banking are sufficient to compel many employees to take advantage of it. Group banking provides banks with a pool of customers they do not have to actively recruit, and reduces costs associated with transactions like direct deposit of paychecks. Group banking also gives banks access to more capital via the money deposited by group members.

Members of a group banking plan do not have to be employees of the same company; members of any organization or cooperative may be able to take advantage of a group banking plan. Group banking plan members may be members of the same church, HOA or other organization.