By: Kia McCollie
Types of Depository
- Commercial banks and credit unions are the most commonly used depository institutions. Although both types of institutions offer a range of banking services, they are actually quite different in terms of their ownership structure and the types of consumers they serve.
- Millions of people use financial services offered by depository institution a daily basis to help them manage their money
- Commercial banks are for profit depository businesses that offer financial services to both consumers and other businesses.
- Credit Unions are depository institutions that offer many banking services. But unlike banks , they are owned by customers, who are usually called members.
- The physical location of a depository location may influence your choice
- Federal Deposit Insurance Cooperation (FDIC): is a federal government agency that insures depository institutions that have elected for FDIC coverage against loss.
National Credit Union Administration : provides insurance protection for credit unions. The credit is the same as the FDIC: each depositor is insured against loss up to maximum of $250,000 against loss.
As long as you stay within the coverage limits your money is safe from loss due to the or failure of the financial institution. Not all depository institutions are covered by the FDIC or NCUA, so you should check for coverage before deposing any money.
Services Offered by Depository Instutions
-Depository institution offer a wide variety of financial services to their customers
- Depository institutions offer a wide variety of financial services to their customers.
- Transaction and Savings Tools: Depository institutions offer services that allow you to use your money without having to handle cash. These services are known as transaction and savings tools. They are accounts offered by depository institutions whose main purpose is to help people manage their money.
- Transaction and savings tools may or may not earn interest. Interest is the price paid for using someone else’s money. If you deposit money in an interest‐earning savings tool account you will be paid interest during the time the institution holds your funds and uses it for its own purposes.
- If you want to earn interest on your deposits look for high interest rates. When you borrow money and have to pay interest look for low interest rates.
Additional Features of Depository Institution Services
- Online banking A depository institution may offer online banking, also known as Internet banking, as a feature of their services. Online banking allows customers to complete certain transactions from a secured Internet site by using a username and password from any place in the world with Internet access.
- Debit cards A debit card is electronically connected to the cardholder’s depository institution account. Debit cards allow customers easy access to money in their savings and checking accounts either at the point of sale or through an automated teller machine (ATM).
- Automated teller machines (ATMs) An ATM is a machine that allows individuals to complete certain transactions from the machine without human assistance.
- Contactless payment Contactless payment transactions can be completed with no physical connection between the payment device and the physical point of sale (POS) terminal or store clerk.
- Overdraft fee – A fee charged if you withdraw more money from your account than is available.
- ATM fees – Your depository institution may charge you for using an ATM that belongs to another depository institution.
- Minimum balance fees ‐ Some accounts require a minimum account balance. If you go below that balance you will be charged a fee.
- Depository institution often charge many other types of fees. Fees can vary greatly across depository institution. Researching potential fees that you may face as an account holder is an important part of choosing a depository institution. Ask for a list of fees when opening an account. Most fees charged for items and transactions can be avoided if you manage your account(s) well.