Most of us know what a bank is. We know that in order to better manage our financial life we should have both a checking and savings account at a minimum. We also know their services are similar across the board. Some of these services include:
- Accepting deposits;
- Making auto, home and business loans;
- Reporting what you paid and earned;
- Issuing credit cards;
- Online bill payment;
- Providing investments.
The list can go on but the above are the basic things most banks will offer. However, terms and conditions vary from bank to bank. That is why everyone should consider their unique needs and then select the bank that best meets those needs.
Comparing Your Choices
There are national, regional and local community banks around the country. These banks are further categorized into the following segments:
- Commercial Bank
- Savings & Loans (S&C)
- Credit Unions
- Mutual Funds and Brokerage Firms
- Virtual (Online) Banks
Commercial Banks
Commercial Banks serve both individuals and businesses. They typically have multiple, well-located branches throughout a region and offer broad range of services. Deposits are FDIC-insured up to $100,000 per type of depositor's account. The only con is that fees at these banks can be the highest.
Savings and Loans Banks (S&L) \
S&L banks tend to have lower fees than commercial banks. In some cases, service can be better due to the lower number of clients, especially at smaller banks. Most are FDIC-insured, the only con would be that they sometimes require you to inform them of a withdrawal you intend to make. They often have fewer branches; therefore, you can rack up lots of ATM fees for using non-partner banks.
Credit Unions
Credit Unions typically have the lowest fees and loan rates because they are non-profit. Earnings are paid out to members at the end of the year. The main con is that as few as one or two percent happen to be federally insured. Like S&L's, they often have fewer branches; therefore, you can rack up lots of ATM fees for using non-partner banks.
Mutual Fund and Brokerage Firms
Mutual Fund and Brokerage Firms offer very limited banking services with low-cost or free checking linked to some interest-paying money market funds. The most notable con is that they often require larger minimum balances and they are not FDIC-insured, but they have private insurance.
Virtual (Online) Banks
Virtual Banks are all online, thus there are no branches. In many cases, they don't even send paper statements. Clients are emailed their monthly statements to view or print from online. They are FDIC-insured and are beginning to lose some of their appeal as many commercial banks and even credit unions offer the 100 percent online banking. The primary con with a virtual bank is there are limited ATM machines. Thus, if clients can't find partner ATM's they can pay lots of money in annually in ATM fees.
