Depository Institutions

Livia Morris; Personal Finance

Commercial Banks

  • For-profit depository businesses
  • They offer financial services to both consumers and businesses.
  • They are the most commonly used depository business.
  • They offer the widest variety of services to customers.
  • They are different than other depository businesses in terms of their ownership structure.
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Credit Unions

  • Owned by their customers, whom are usually called members.
  • It has membership qualifications that require its members share a common bond such as the same employer, etc.
  • NON-Profit organization exempt from federal income tax.
  • They're allowed to pay higher interest rates on deposits, charge lower interest rates on loans and charge lower fees, compared to banks and other depository institutions.
  • They offer many different banking services compared to others.
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DEPOSIT INSURANCE

Federal Deposit Insurance Corporation (FDIC)

  1. Federal government agency that insures depository institutions that have elected for FDIC coverage against loss.
  2. The standard insurance amount is $250,000 per depositor, per insured institution, for each account ownership category.
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National Credit Union Administration (NCUA)

  1. It provides insurance protection for credit unions.
  2. The coverage is the same as with the FDIC; each depositor is insured against loss up to a maximum of $250,000 against loss.
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Transaction and Saving Tools

Checking Account

  • Allows you quick access to funds for transactions.
  • You can transfer money from one account to another through the use of paper checks, debit cards, or withdrawing cash directly from your checking account.
  • Very popular among consumers because they reduce the need to carry large amounts of cash and are easy to use and manage.
  • Some earn interest, some do not.
  • At credit unions, they're known as share draft accounts.
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Savings Account

  • Most common type of bank account.
  • It may be the first account you open at your depository institution.
  • Generally for money you don't intend to use for your daily expenses.
  • It will earn interest on its balance and be stored in a secure location.
  • At a credit union, it is often referred to as a share account and is required for membership.
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CREDIT

  • Allows you to borrow money from the financial institution in exchange for your promise to repay those funds in the future.
  • Various credit products include loans for the purchase of a house, auto or education.
  • Many institutions offer credit cards to their customers.
  • Your 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.
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Additional Features

Online banking

  • It 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.
  • You can access account information and statements, transferring money between accounts, paying bills and applying for credit.
  • The payment will occur automatically on a specific date each month without the customer having to write a check or initiate the payment.
  • Many institutions have developed apps that allow online banking access from devices such as smartphones, tablets and other mobile devices.
  • This is called mobile banking.
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Debit Cards

  • Electronically connected to the cardholder's depository institution account.
  • Allow customers easy access to money in their savings and checking accounts either at the point of sale or through an ATM.
  • They function like a check, but debit transactions are faster and more portable because they are electronic.
  • They allow customers to withdraw cash or electronically access they're accounts to transfer funds between accounts or view balances.
  • They require a PIN, or signature.
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ATM

  1. Allows individuals to complete transactions from the machine without human assistance.
  2. They are accessed via an ATM card plus the PIN.
  3. This allows customers to withdraw money and deposit money into their accounts.
  4. They can also make account transfers and view their account balance.
  5. The number and location of ATM's varies by depository institution.
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Contactless payment

  1. These transactions can be completed with no physical connection between the payment device and the physical point of sale (POS) terminal or store clerk.
  2. If your institution offers this, 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.
  3. You may or may not have to use a PIN to authorize.
  4. This allows or fast payment transactions.
  5. Not all merchants have the technology to support contactless payment.
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FEES

Overdraft fee

  • Fee charged if you withdraw more money from your account than is available.
  • Some institutions offer overdraft protection.

ATM fees

  • Your institution may charge you for using an ATM that belongs to a different institution.

Minimum balance fees

  • Some accounts require a minimum account balance.
  • If you go below that balance, you will be charged a fee.
  • Before opening an account, you should ask if they enforce one and make sure you are okay with the minimum balance amount.
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