Kamis, 09 Juni 2011

Building Society

 A building Society  is a financial institution much like a bank, except that it is owned by its members and not by shareholders. Apart from that there are very little obvious differences between them, especially these days. 
Originally, building societies were set up to enable each of their members to purchase their own home. All the members basically pooled their savings and when the last member had a house the building society would be dissolved. This changed in the early 19th Century when building societies started offering new members the opportunity to save and buy a house on a continuous basis, and as a result building societies effectually became permanent institutions.
Over the years building societies have been offering more or less the same financial services as banks to such an extent that there is now very little difference between the two.
So which is best, building society or bank?
This isn’t an easy question to answer for obvious reasons. Each building society and bank has to be assessed on its own merits for the products they are offering. For example, some financial institutions may offer you a better short term deal on one product in order to attract you as a customer, but the long term scenario can be very different. At the same time it doesn’t follow that because they offer one good product that their other products are necessarily a good deal too.
Also, as banks are trying to please their shareholders they are often under pressure to hike up their prices for better profits, where Building are not structured in the same way and can offer a lower price long term, particularly as they do not have to dish out dividends to shareholders.
However, banks will often appear as a “best buy” simply because of the attractive deals they can offer new customers. On saying that, building societies and banks are so similar nowadays that many people are not even aware of whether a particular institution is in fact one or the other. This of course hasn’t been helped by the fact that in the last few decades many building societies have become de-mutualised and have actually converted into banks.
A recent survey by fool.co.uk revealed that most people would really prefer talking about their financial circumstances with a building society rather than a bank and would also prefer to have a mortgage from a building society, indicating that there is a higher degree of trust with building societies. However, best buy tables seem to indicate that banks actually offer a better deal in three specific areas and these are credit cards, savings accounts and mortgages. Naturally, the building societies would disagree and with good reason too.
The recent difficulties with banks like Northern Rock have resulted in many people losing faith in banks so they are turning to building societies instead. Trust is a key area for both building societies and banks because once they have your custom and your trust; you are more likely to turn to them first for any other financial services you might need.
As with everything else these days, and especially in these difficult economic times, it pays to shop around for a particular product as these will vary quite significantly from building society to building society, just as they do from bank to bank.

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