A critical part of good money management is matching the right bank services to your requirements. Depository institutions include commercial banks, savings and loans and credit unions. These institutions are regulated by state and federal agencies.
For example, the Federal Deposit Insurance Corporation (FDIC) insures federally chartered commercial banks and savings and loans against loss. Depositors are insured up to $250,000 per depositor, per insured bank, for each account ownership category.
Commercial banks provide a full range of bank services, including checking and savings accounts, loans, credit cards, investments, financial counseling and more. Selecting a single financial institution for all your financial needs may provide some advantages as you may gain access to a more complete menu of services that way.
Checking and Savings Accounts. Common bank services provided by depository institutions include checking and savings accounts. A checking account uses paper or electronic checks plus debit card transactions to withdraw money you deposit in your account to pay for purchases. Checking accounts can be either interest or non-interest bearing accounts.
Savings accounts are interest bearing accounts. You deposit funds into savings with the objective of earning interest on your balance. Typically, savings account balances are held for longer periods of time. Unlike checking accounts, the funds in savings remain deposited for future purposes.
Interest Earning Accounts. Full-service commercial banks provide multiple investment options for you to earn interest on deposits. These may include the following:
Certificates of Deposit (CDs) represent an insured interest earning savings instrument with restricted access to the funds. The terms for CDs will vary by product and institution.A Money Market account generally offers higher interest rates than a savings account. In addition, some Money Market accounts provide limited check writing privileges.
Interest Bearing Accounts. Popular bank services offered by financial institutions are credit cards and loans:
Credit Cards allow you to make a purchase now and repay the charged amount later. If you pay the entire balance before the grace period defined in the credit card agreement ends, you won’t be required to pay interest on the balance. However, if you pay any portion of the balance after the grace period ends, you will pay interest on the remaining balance per your agreement terms.Loans are important bank services that provide a way for you to borrow money for large purchases such as cars, homes and other needs such as home improvements. You pay back the money you borrow over time, such as monthly, with interest. The payment schedule, interest rate and other terms of the loan will be spelled out in your loan documents.
Additional Bank Services. In addition to common bank services such as checking and savings accounts, CDs, money market accounts, credit cards and loans, full service financial institutions may offer a variety of additional services. These bank services may include:
Safe-Deposit Boxes for securing valuable and important personal items.Financial counseling to help you make good money management decisions. Some larger banks offer a wealth of information and guidance through in-person financial advisors, comprehensive websites, online resources and other tools.
When selecting a financial institution, you must keep in mind your personal situation and requirements and how each set of bank services addresses those needs. It’s important to compare each bank’s services and fees and then select the best match for your money management style and goals.