Different kinds of financial institutions
Among the types of institutions where you can deposit your money are banks, savings and loans, credit unions, and Internet banks. Most offer the same basic services, but features can vary widely.
Banks. Banks are financial institutions that allow customers to borrow and lend money. They hold deposit accounts, such as checking or savings accounts, that provide access to funds on demand and allow account holders to make or receive payments through a variety of channels, including cash, checks, direct deposit, ATM or debit card and wire transfer. Most offer a full array of online banking services as well as physical branch locations.
Savings and loan associations. A savings and loan or thrift specializes in accepting savings deposits and making mortgage loans. Today savings and loans often offer many of the same services as traditional banks including access to savings and investing outlets such as savings accounts and certificates of deposit (CDs).
Credit unions. Member-controlled credit unions sometimes offer higher interest rates on savings accounts and CDs, and more favorable loan rates than banks. However, they generally have fewer locations, so make sure you are comfortable with their policy on using non-member ATMs.
Internet banks. Because they don't have to maintain "brick and mortar" branches, Internet banks may offer better interest rates and fee structures. Many also absorb "out-of network" ATM fees. However, checks must be deposited by mail, so consider carefully if such delays are a concern.
A few factors to consider when choosing a financial institution include:
Convenience. Are branches and automatic teller machines (ATMs) located near where you live, work or go to school? If you choose a credit union, is it part of a network with free ATM access at other institutions?
Cost. Is there a monthly maintenance fee? What other fees or penalties are charged, such as those for bounced checks, overdraft protection or using non-network ATMs?
Interest rates. Does the institution offer competitive interest rates for savings and checking accounts? Are those rates offset by high minimum balance limits or other restrictions?
Banking products and services
Checking accounts. The basic account everyone needs to pay bills and have ready access to cash. Look for a checking
account that has:
No monthly maintenance fee.
Low balance required to qualify for free checking.
No charge for writing checks.
Online account access.
Free online bill payment.
Free phone or email alerts for low balances, checks or deposits clearing or payments due.
Insurance coverage on deposits through Federal Deposit Insurance Corp. or National Credit Union Share Insurance Fund.
Savings accounts. Savings accounts are a good place to save money that can be easily withdrawn. Try to put aside some cash each month so when an emergency arises (car repairs, unexpected medical or travel expenses, etc.) you won't have to tap a credit card. Keep in mind that regular savings accounts typically pay lower interest rates, so you may want to investigate money market savings accounts or short-term CDs (www.bankrate.com can help you search for rates).
ATMs. ATMs are found on most corners these days, but that added convenience can come at a high cost. Many banks charge a fee for
using another bank's ATMs; in addition, they sometimes charge non-account holders to use their own ATMs. Try to:
Choose a bank whose ATMs are conveniently located.
Consider a credit union that waives fees for affiliated institutions' ATMs.
Use your debit card to get cash back on shopping transactions.
Always verify balances before withdrawing money to avoid overdraft charges.
Debit cards. Debit cards look like credit cards but work very differently. Debit cards are linked to your checking and/or savings account, and can be used to withdraw cash from an ATM or to purchase goods at many merchant locations. In either case, the amount is automatically and immediately deducted from your account, just as if you had written a check or taken out cash. To use your debit card properly, you must have enough money in your account to cover the transaction.
Key debit card benefits include:
They can be used at ATMs, 24/7, to withdraw cash or make deposits.
Many merchants allow cash back with purchases, saving trips to the ATM.
They can be used out of town or where personal checks may not be accepted.
They are safer than carrying checks or cash.
Debit cards with a VISA® or MasterCard® logo carry "zero liability" fraud protection — if you promptly report a
lost or stolen card, you may not be responsible for fraudulent purchases or withdrawals.
A few cautions regarding debit cards:
Always verify account balances before making a withdrawal to avoid overdrafts.
Promptly enter all transactions in your check register, including ATM charges.
Guard your card and personal identification number closely.
Online banking. One of the best financial habits you can adopt is to frequently check your account balances for recent activity, either by phone or online. By doing so every day you can see when deposits and checks have cleared, spot transactions you forgot to enter, watch for fraudulent activity and electronically transfer funds between your accounts.
Most banks also allow customers to pay bills online — either automatically each month or on a case-by-case basis. This saves time, postage and paper, and helps ensure you won't incur late payment charges. As always, you must make sure there is enough in your account to cover the payment. Additional precautions should include never conducting banking transactions on a public computer or using a non-secure wireless connection.
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