What is a Limited Service Bank?

A limited service bank is any form of a banking business institution that is located separately from the bank's main location. Banks may offer separate services from what they offer at their main facility, or between the other branches.

Key Takeaways

  • Some institutions are self-regulating and determine the types of services and products offered at their locations and the time frames in which they are available based off of their bank charter.
  • A limited service bank may have a separate location for taking deposits, where they do not allow their products and services to be sold. These are different from full-service banks, which offer all services and products across all locations.
  • Automated Teller Machines (ATMs) act a lot like limited service banks. Consumers can deposit and withdraw monies at ATM locations that are offsite from the main branch locations.

How a Limited Service Bank Works

A limited service bank can offer limited options by choice. Some institutions are self-regulating and determine the types of services and products offered at their locations and the time frames in which they are available based off of their bank charter. These types of banks may specialize in specific products, such as credit lines or personal loans, and may not wish to expand beyond those products across all locations.

They could be also limited by the laws in their state. These regulations are more common in the Midwest and Southwest of the U.S., where banks are more limited on the number of branches they can have that offer full services. This is to prevent a banking monopoly in more rural areas where communities could be better serviced by smaller institutions. These are called unit banks or unit states.

A limited service bank may have a separate location for taking deposits, where they do not allow their products and services to be sold. These are different from full-service banks, which offer all services and products across all locations.

Bank ATMs

Automated Teller Machines (ATMs) act a lot like limited service banks. Consumers can deposit and withdraw monies at ATM locations that are offsite from the main branch locations. Users can also check their balances and even pay bills (mortgage or loans) from the ATM, and transfer funds from one account to another.

ATMs offer convenience for those traveling abroad. Making withdrawals in another currency often comes with additional fees like a "surcharge" and "foreign ATM" fees.

Example of a Limited Service Bank

For example, say that the hypothetical Money Bank, U.S. has 10 branches across Southeastern Pennsylvania. At every location you can make a deposit, cash a check and apply for a home mortgage. When they run a promotional offer crediting new account holders $20 towards ordering checks, the promotion runs throughout all of their 10 branches. A customer could walk into any branch and receive all the same services, at the same time. This is a full-service bank.

Now take the hypothetical U.S. Coin Bank, an Iowa-based bank that also has 10 branches across the state. When a customer goes to the branch in Cedar Falls, they can only cash checks if they are a current account holder. A customer who wants to apply for a mortgage with U.S. Coin Bank wouldn’t be able to do it at the Cedar Falls branch, but would instead need to travel to the Cedar Rapids branch to do so. Furthermore, they would need to travel to the branch in Carbon if they wanted to take out a credit card. This is an example of a limited service bank.