Types of Depository Institutions

Corrie Burkart

Depository Institutions

  • They accept deposits from consumers and the safety of those deposits is often guaranteed by the government. The range of valuable services tied to deposit accounts (online banking, checking accounts and debit cards, bill payment services, automatic savings transfers) makes depository institutions an important component to a financial plan.
  • One of the most important services that a depository institution offers is a safe and secure place to deposit your money for future use

Commercial Banks

Definition: For‐profit depository businesses that offer financial services to both consumers and other businesses. Banks are usually the largest depository institutions and offer the widest variety of services to customers.

Credit Unions

Definition: Depository institutions that offer many banking services. But, unlike banks, they are owned by their customers, who are usually called members.

Benefits of Commercial Banks and Credit Unions


  • 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.
  • You can earn interest on your checking or savings account. Most institutions offer interest on savings accounts or share accounts, but not likely on checking or share draft accounts.

Online Banking

  • 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.
  • Online banking activities include accessing account information and statements, transferring money between accounts, paying bills and applying for credit.
  • Mobile banking is also now offered by many institutions. This is essentially the same thing as online banking, except it can be used on your mobile smartphone anywhere and at anytime.

ATMs and Debit Cards

  • An ATM is a machine that allows individuals to complete certain transactions from the machine without human assistance.
  • ATMs accept debit cards that come with a PIN code for security purposes.
  • ATMs allow customers to withdraw and deposit money into their account(s), as well as make account transfers and view account balances.
  • The number and location of ATM’s varies by depository institution.

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.
  • If a depository institution offers contactless payment options then you will receive a debit card, credit card, or some other type of electronic card that allows you to simply “wave” the card in front of a sensor to make a purchase.
  • This allows for fast payment transactions, but not all merchants have the technology to support contactless payment.

Services of Commercial Banks and Credit Unions


  • Federal Deposit Insurance Corporation (FDIC) is a federal government agency that usually insures commercial banks. The standard insurance amount is $250,000 per depositor for each account ownership category.
  • National Credit Union Administration (NCUA) provides insurance protection for credit unions.The coverage is the same as with the FDIC; each depositor is insured against loss up to a maximum of $250,000 against loss.

Transactions and Savings Tools

  • Commercial Banks: Offers checking and savings accounts. A checking account allows for quick access to funds. You can transfer money with paper checks, a debit card or by withdrawing cash. Some checking accounts earn interest but most do not. A savings account is the most common type of bank account.
  • Credit Unions: Share draft accounts (checking) and a share account (savings). A share draft account also provides for easy access to funds. They are also very popular among costumers. A share account is required for membership.


  • Credit products allow you to borrow money from the financial institution in exchange for your promise to repay those funds in the future.
  • Depository institutions may provide a variety of credit products such as loans for the purchase of a house, auto or education. Many depository institutions also offer credit cards to their customers.
  • When you apply for credit, the financial institution will determine whether you qualify for the loan based on their assessment of the likelihood that you will repay as agreed.
  • The institution will also determine the amount of time you have to repay, and the price of the loan, in the form of the interest rate to be charged on the amount of money you owe

Financial Advice

  • Commercial banks and credit unions may also offer information, advice and assistance regarding a wide range of financial‐related topics including investments and estate planning.

Safe-Deposit Box

  • A safe‐deposit box is a secured box at a depository institution that you can use to store valuable personal items.
  • Many people use safe‐deposit boxes to store important paperwork such as birth certificates, Social Security cards and wills.

Special Needs Payment Instruments

  • Traveler’s checks, certified checks, cashier’s checks and money orders are all special payment instruments that have a specific function and are available at most depository institutions.

Interesting Facts

Credit Unions:

  • A credit union has membership qualifications that require its members share a common bond such as the same employer, the geographic area in which they live or membership in an organization.
  • Credit unions are non‐profit organizations exempt from federal income tax. This feature often allows them to pay higher interest rates on deposits, charge lower interest rates on loans and charge lower fees, compared to banks and other depository institutions.
  • One example of a credit union in North Carolina is the State Employees' Credit Union