Understanding and using banks

Banks, credit unions and more

When we talk about a bank, we are actually speaking about many different kinds of institutions. There are commercial banks, credit unions, savings and loans, and thrifts that do all sorts of things such as taking deposits, making loans, and sending statements. They may call a checking account by a different name, but the account serves the same function. Alas, not all banks are the same. In this debt free article, we will cover commercial banks, credit unions, savings and loan banks, and internet banking so you can get a feel for each does exactly.

Commercial banks

These banks are organized to make money for their stockholders. Commercial banks make money in many different ways. They make money by charging interest on loans, charging fees for different services they provide to customers and also by investing the money you deposit with them. Your money makes money fro them while it is in their accounts.

Like any business, a commercial bank also had several categories of expenses. Of course, they have to pay for their employees, buildings and other operation costs. They incur costs to create and sent statements to customers by mail. They also pay varying rates of interest on various kinds of accounts that the bank offers to its customers. Additionally, stockholders expect to be paid a share of the profits each quarter.

Commercial banks serve individuals, small business owners, large corporations, and every other type of organization. In most cases, the most profitable accounts are the ones from large companies. The least profitable accounts are typically those held by individuals. Some commercial banks may make a conscious effort to price their services (like interest paid and fees they charge) to be attractive to the average individual, but others may not because they would obviously prefer to deal with big earner such as big business accounts.

Just be certain that you get a good feel fro your banks attitude towards the small guy. Many times, you will find that the biggest bank will not serve you the best. Always be sure that you go with a bank that will serve you with their best intensions in mind.

Credit unions

Credit unions are not for profit organizations set up by their depositors (members) fro the benefit of the depositors (members). Originally, companies or fraternal organizations set up credit unions for their employees or members. These days, credit unions typically serve anyone who lives in a designated geographic region.

Credit unions make money the same ways the commercial banks do. They charge interest on loans, they charge fees for various services that they provide, and they invest the money you deposit as well. Also, credit unions have many of the same expenses as commercial banks, employees, buildings and statement mailings and interest paid. However, credit unions do not have to deal with stockholders as there are none.

Instead of stockholders, each depositor in a credit union is a member and has a share of ownership. Instead of paying dividends each quarter, the credit unions will many times pay higher interest or have lower fees and interest rates for their members. Only individuals can belong to credit unions, not businesses or other organizations.

If there are one or more credit unions in your area, you should call or visit them in order to see which one will offer you the best provisions should you join. Compare these offerings to your bank’s provisions as well. Many times, you will find that credit unions offer a better package of services fro individuals such as yourself.

Worth mentioning: The money you deposit into a bank account is insured up to $100,000 by the Federal Deposit Insurance Corp. (FDIC). Credit unions offer similar protection trough the National Credit Union Share Insurance Fund (NCUSIF), which is a federal fund that insures member’s deposits up to $100,000.

Savings and loans

A saving and loan is a bank that provides more limited services. The same goes for thrifts. If you live in a smaller township or rural location, you may find that these types of banks are the best thing for you. If you live in a rural area, many times you do not need anything for than the limited options that these types of banks offer.

Online banking

First of all, online banking can mean a couple of things. One: It means that your regular bank or credit union may allow you to access your banking accounts online over the Internet. This means you can transfer funds, pay your bills, and see which checks have cleared all by accessing your accounts from your computer. Two: There are banks that only do business over the Internet. These banks have no branches that you can visit. The idea behind this is to save money and offer customers cheaper services. Without any extra overhead from operations, money saved is passed onto the customer by be provided inexpensive banking services.

Either way, both types of online banking have been slower to catch on than the banks and experts guessed that they would. However, the first online banking type we mentioned where you use your computer at home so do you do not have to go into your branch or call, is catching on better due to free access and expanded services from certain banks.

If you are interested in banking online, first figure out which type of online banking you are interested in, then start checking out fees involved and benefits the banks in your area involve. Shop around. All banks are not the same. Some banks provide free online banking, some do not. Either way, look for any hidden fees your bank may try to tack on. You have seen the commercials where banks advertise free checking accounts and then you get there and they have all of these rules – be aware. Always make sure the bank you go with has FDIC insurance not matter what type of online banking you go with. The website will post this info on their home page usually. Always ask.

You may want to retain your current checking account until you are certain of your decision to bank solely on the Internet (no locations). You want to make certain that this style of banking satisfies all of your banking needs. For instance, you may not find easy access to the website of you online only bank. You may not be satisfied with the speed of services or some other situation. Just be sure you like the online only banking before you cancel your existing checking account at a branch bank.

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