Banks are institutions that take deposits, cash checks, and make loans. They are essentially home bases for keeping your money safe and making transactions.
Using a bank account or other bank services can give you the advantages of:
The money you deposit at a bank is safe. That’s because the federal government, through the Federal Deposit Insurance Corporation (FDIC), insures bank accounts dollar for dollar for up to a total of $250,000 per person, per institution. So even if your bank goes out of business (which is extremely unlikely) and your money disappears, you’ll be paid back up to that amount.
“A bank is a place that will lend you money if you can prove that you don’t need it.“
Banks offer various products and services to their customers, including:
Depending on the bank, you can access services in person at a branch, over the phone, online, or through an app.
Banks make loans to people and companies and charge interest on those loans (they also make money if you trigger fees on your account, although for most banks that’s not their main source of income).
Because they receive that interest income, banks are generally also able to pay a small amount of interest on money held in savings accounts.
Like a bank, a credit union is a financial institution that provides deposit accounts and lends money. Unlike banks, they’re not-for-profit organizations owned by their members. While they offer most (or all) of the same services as a bank, credit unions typically use profits to fund projects and services that benefit members, such as lower fees or higher interest rates on savings accounts.
Here are the main differences between banks and credit unions:
|Who owns it?||Shareholders||Members|
|Who can be a customer?||Anyone||Only those who meet membership requirements|
|Typical fees||Many fees; monthly service charges||Lower fees; many free services|
|Are deposits insured?||Yes, through the FDIC||Yes, typically through the National Credit Union Administration (though some are privately insured)|
Some credit unions are tiny, local establishments that serve people who live in a certain town. Others are nationwide. And some are set up only to benefit their employees, such as the Boeing Employees Credit Union. This can make a difference in not only who is eligible but also how accessible bank services are. (For example, a local credit union might not have as many free ATMs as a nationwide one.)
Banks (and credit unions) offer many options to keep your money safe and your financial life on track, such as checking or savings accounts, credit cards, and loans.