Banks in the United States are overwhelmingly for-profit businesses, not nonprofit organizations. The commercial banks where most people hold checking and savings accounts are private corporations that earn revenue, pay corporate income tax, and pass their remaining profits along to shareholders. A smaller slice of the industry — credit unions and mutual savings banks — operates without shareholders and returns any surplus to members or depositors instead.
That distinction shapes the rates you earn, the fees you pay, and who ultimately benefits when your money sits in an account.
What Makes a Commercial Bank For-Profit
Most commercial banks are organized as C-corporations under either a federal charter from the Office of the Comptroller of the Currency or a charter issued by a state banking regulator. The bank is a separate legal entity from its owners, and its board of directors has a fiduciary duty to act in the interest of the shareholders who hold equity in the company.1Harvard Law School Forum on Corporate Governance. The Fiduciary Duties of Bank Boards
As C-corporations, banks pay the standard 21 percent federal corporate income tax on their earnings, plus any state taxes that apply. Some smaller community banks have elected S-corporation status, an option Congress opened to them in 1997, which lets profits pass through to shareholders’ individual returns. S-corporation banks still have to meet federal requirements, including a limit of 100 shareholders and a single class of stock.2Internal Revenue Service. S Corporations
Because banks are so heavily regulated, people sometimes assume they are quasi-governmental. They aren’t. A charter and federal oversight don’t change a bank’s commercial nature. Which products to offer, what to charge for them, how many branches to run, and how many people to employ are all decisions driven by profitability.
How the Profit Motive Shows Up in Your Account
The core way a bank makes money is the spread between what it pays depositors and what it charges borrowers. A bank might pay around 0.39 percent on a standard savings account while charging 7 percent or more on an auto loan and upward of 15 percent on a credit card balance.3National Credit Union Administration. Credit Union and Bank Rates 2024 Q1 That gap is called the net interest margin, and in the fourth quarter of 2025 it averaged 3.39 percent across the industry, with community banks averaging 3.77 percent.4FDIC.gov. FDIC Quarterly Banking Profile Fourth Quarter 2025
Fees are the second major revenue stream. Monthly maintenance charges on checking accounts, overdraft penalties, wire transfer fees, out-of-network ATM charges, and paper statement fees all flow to the bottom line. The average overdraft fee has fallen to roughly $27, and several large banks, including Capital One, Citibank, and Ally Bank, have eliminated the charge entirely. Bank of America has reduced it to $10. A federal rule effective October 2025 set a $5 benchmark for overdraft charges at institutions with more than $10 billion in assets, treating higher charges as a form of credit subject to added disclosure.5Consumer Financial Protection Bureau. Overdraft Lending: Very Large Financial Institutions Final Rule Federal law requires banks to disclose every fee they can charge on a deposit account, so you should receive a fee schedule when you open one. Many of these charges are negotiable; the FDIC encourages customers to call and ask for waivers, especially when the fees are infrequent.6FDIC.gov. Overdraft and Account Fees
Card transactions generate a third stream. Every time you swipe a debit or credit card, the merchant pays an interchange fee, and a portion of it goes to the bank that issued the card. Credit card interchange typically runs from about 1.6 percent to 2.5 percent of the transaction, depending on card type and merchant category. For banks with more than $10 billion in assets, the Durbin Amendment caps regulated debit interchange at roughly 21 cents plus 0.05 percent of the transaction value.7Federal Register. Debit Card Interchange Fees and Routing
Banks also invest excess capital that isn’t currently loaned out, typically in government securities and high-grade corporate bonds, which keeps income steady when borrowing demand is soft.
After operating costs, FDIC assessments, and taxes, what’s left belongs to shareholders. Banks return it through quarterly dividends and stock buybacks, or hold it as retained earnings that go back into technology, lending capacity, or the capital reserves regulators require.8Board of Governors of the Federal Reserve System. Capital Adequacy
The Nonprofit Alternatives
Credit Unions
Credit unions are cooperative associations organized to promote thrift among members and provide affordable credit.9Office of the Law Revision Counsel. 12 USC 1752 – Definitions The members are the owners. There are no outside shareholders, so any surplus at year-end goes back to members — usually as lower loan rates, higher savings yields, or reduced fees.
A credit union organized and operated for mutual purposes and without profit is exempt from federal income tax under Section 501(c)(14) of the Internal Revenue Code.10Office of the Law Revision Counsel. 26 USC 501 – Exemption From Tax on Corporations, Certain Trusts, Etc. That tax advantage shows up in the rates members get. Nationally, the average used-car loan rate at credit unions was 6.46 percent compared to 7.51 percent at banks, and credit card rates averaged 12.86 percent versus 15.29 percent.3National Credit Union Administration. Credit Union and Bank Rates 2024 Q1
Governance works differently, too. A volunteer board is elected by the membership on a one-member, one-vote basis, regardless of how much any member has on deposit. To join, you typically need a common bond with other members: a shared employer, a shared community, or membership in a shared organization.
Mutual Savings Banks
Mutual savings banks sit between commercial banks and credit unions. They have no shareholders and operate for the benefit of their depositors, borrowers, and communities, with depositors effectively holding ownership rights.11FDIC.gov. Mutual Institutions Unlike credit unions, they don’t share the federal income tax exemption and are generally subject to corporate income tax. But without shareholders demanding returns, they can put more weight on competitive rates and community lending. Some mutual savings banks eventually convert to stock-owned institutions, and depositors who don’t buy shares in the new entity can lose their ownership interests in the process.
What the Difference Means for You
If you bank at a for-profit commercial bank, the pricing you see reflects the need to generate a return for shareholders on top of covering costs, taxes, and capital requirements. That’s not inherently bad — for-profit banks tend to have larger branch networks, more sophisticated technology, and broader product lineups. It does mean the deposit rate you’re offered and the fee schedule you’re handed have shareholder returns priced into them.
At a credit union or mutual savings bank, there are no outside shareholders to pay, so surplus tends to be returned as better pricing to the people who use the institution. The national rate comparisons back that up on loans and credit cards. The tradeoff is often membership eligibility (for credit unions) and sometimes smaller networks or fewer product lines.
Regulation and Insurance Apply Either Way
Whether a bank is for-profit or a member-owned cooperative, the deposit protection is comparable. The FDIC insures deposits at member banks up to $250,000 per depositor, per bank, for each account ownership category.12FDIC.gov. Deposit Insurance Credit unions have an equivalent program through the National Credit Union Administration, which insures share accounts up to $250,000 per member.13MyCreditUnion.gov. Share Insurance
Regulatory rules also apply on both sides. Capital requirements set by the Federal Reserve, OCC, and FDIC force banks to keep a buffer of their own funds at risk, since deposit insurance would otherwise let them take on more leverage than the market would allow.8Board of Governors of the Federal Reserve System. Capital Adequacy The Community Reinvestment Act requires federal agencies to evaluate how well a bank serves the credit needs of its entire community, including low- and moderate-income neighborhoods.14OCC. Community Reinvestment Act (CRA) A for-profit charter doesn’t mean an unregulated one, and a nonprofit structure doesn’t mean an unsupervised one. The difference the searcher should carry away is where the surplus goes: to shareholders at a commercial bank, and back to members or depositors at a credit union or mutual savings bank.