Associate Bank

What Is an Associate Bank?

An associate bank is a bank that is affiliated, usually through membership, in a regional or national organization such as a clearinghouse, an electronic payments network, or a bank card network, such as Visa or MasterCard. There are usually different classes of membership in regional and national associations, which correlate with shares owned or fees paid.

Key Takeaways

  • An associate bank is a bank that is affiliated with a payments network, such as a credit card or automated clearinghouse.
  • Many banks who issue branded credit cards become associate banks in clearing networks that process and settle all payments.
  • Regional banks may also form alliances with larger banks to facilitate services in a similar type of association.
  • Credit card payment networks and automated clearinghouses help banking transactions run more smoothly.
  • If you have a debit card with a Mastercard or Visa log on it, you are connected to a broader credit card network than a debit card without one.

How an Associate Bank Works

An associate bank is simply a bank that shares customers with other banks. Regional banks often band together to provide services to a wider net of customers. The term "associate bank" is also used to describe banks that accommodate each other's customers across geographic or national lines when each bank's geographic reach is limited. Associate banks may have members in different locales who can utilize services at all banks associated with a regional or national bank, usually a larger or more remote one.

Types of Associate Banks

Clearing Houses

Clearinghouses are banking associations used to facilitate the clearing of checks and other payments, including payments for securities and corporate payments. In the U.S., major clearinghouses include the Automated Clearing House (ACH), which processes most debit and credit transactions, such as payroll, vendor payment, and direct deposits. ACH also processes most of the direct debit transfers used by consumers to pay their bills. Point-of-purchase check conversion is also handled through ACH. Most banking transactions in the United States are handled by ACH.

Other clearinghouses in the United States include the Clearing House Interbank Payment System, which is used for large transfers, and Fedwire, which is operated by the Federal Reserve Bank. The Electronic Payments Network is a private sector member of the ACH operated by the Clearing House Payments Co.

Bank Card Networks

A bank card network is a vehicle for you to use your debit card at various locations because the network transfers the payments, and authorizes, processes, and sets the terms of your card's transactions.

Most banks are associated with bank card networks that allow them to offer their customers debit and credit card services. Many bank debit cards operate on the Visa or MasterCard bank card network, the two most significant in the United States. Banks in other countries may be associated with different bank card networks. However, the largest bank card networks allow customers to use debit and credit cards at ATMs and point-of-sale terminals around the world.

When your debit card is connected to a network, it can be used in more locations and offer you more freedom to use it.

If your bank is an associate bank, it could be beneficial when you travel abroad. For example, a small state bank in the United States may have an associate relationship with a bank in London to accommodate a customer traveling there.

Banking Associations

Many banks belong to regional or national bank associations that allow them to protect their interests through lobbying, perform community outreach and consumer education, establish and maintain industry standards and best practices, offer professional development to employees at member institutions, and distribute financial products and services.

Banking associations are regarded as trade associations. The largest banking association in the U.S. is the American Bankers Association; other banking associations include the National Bankers Association, the Independent Community Bankers of America, and the Consumer Bankers Association.

How Long Does It Take an ACH to Clear?

It generally takes three to five days for an automated clearing house (ACH) to clear your bank account.

What Are the Major Card Networks in America?

The major card networks in America are Visa, Mastercard, and American Express.

What Is the Purpose of the American Bankers Association?

Regional and national bank associations perform many purposes designed to protect their interests and educate and support their communities. Banking Associations lobby, offer education and outreach, and support best practices and industry standards. Associations provide bank employees with support and professional opportunities. They provide banking customers with financial products and services.