2.2.1.

F1

Introduc ontoDepositoryIns tu ons

AdvancedLevel
Millionsofpeopleusefinancialservicesoeredbydepository ins tu onsonadailybasistohelpthemmanagetheir
money. Commercialbanks,creditunions,andsavingsbanksareallexamplesof depositoryins tu ons. Manytypesof
companiesoerfinancialservicestoconsumers.But,depositoryins tu onsarespecialinthattheyacceptdepositsfrom
consumersandthesafetyofthosedepositsiso enguaranteedbythegovernment.Therangeofvaluableservices edto
depositaccounts(onlinebanking,checkingaccountsanddebitcards,billpaymentservices,automa csavingstransfers)
makesdepositoryins tu onsanimportantcomponenttoafinancialplan.

Types of Depository Ins tu ons

Commercialbanksandcreditunionsarethemostcommonlyuseddepositoryins tu ons.Althoughbothtypesof
ins tu onsoerarangeofbankingservices,theyareactuallyquitedierentintermsoftheirownershipstructure
andthetypesofconsumerstheyserve.
Commercial banksareforprofitdepositorybusinessesthatoerfinancialservicestobothconsumersandother
businesses.Banksareusuallythelargestdepositoryins tu onsandoerthewidestvarietyofservicestocustomers.
Credit unionsaredepositoryins tu onsthatoermanybankingservices.But,unlikebanks,theyareownedbytheir
customers,whoareusuallycalledmembers.Acreditunionhasmembershipqualifica onsthatrequireitsmembersshare
acommonbondsuchasthesameemployer,thegeographicareainwhichtheyliveormembershipinanorganiza on.
Creditunionsarenonprofitorganiza onsexemptfromfederalincometax.Thisfeatureo enallowsthemtopayhigher
interestratesondeposits,chargelowerinterestratesonloansandchargelowerfees,comparedtobanksandother
depositoryins tu ons.
Doyouuseadepositoryins tu on?Ifso,whatkindofdepositoryins tu onisit?Ifnot,whatfeaturesofadepository
ins tu ondoyouthinkwouldworkbestforyou?

Thephysicalloca onofadepositoryins tu onmayinfluenceyourchoice.Herearesomeques onstoconsiderwhen

choosingadepositoryins tu onthatbestfitsyourfinancialneeds:

Isthedepositoryins tu onaccessible;doesithavemul pleloca onsclosetohome,workandschool?

Doesthedepositoryins tu onhaveloca ons(branches)throughouttheUnitedStates(somethingtoconsiderif
youtravelalotorplantomove)?
Whattypeoftransporta onisrequiredtoaccessabranchifitisntwithinwalkingdistance?
Ifyouareconsideringadepositoryins tu onwhoseservicesareoeredonlyonline,willthattypeofaccessmeet
yourfinancialneeds?
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2.2.1.F1

Deposit Insurance
Oneofthemostimportantservicesthatadepositoryins tu onoersisasafeandsecureplacetodeposityourmoney
forfutureuse.Stashingyourmoneyawayinwhatyoumightconsiderasafeloca onwithinyourhomeorhavinglarge
sumsofcashinyourwalletisfinanciallyrisky.Iflostorstolenyourmoneyismostlikelygoneforgood.
However,depositoryins tu onsoersecurestorageofbothcashandtransac ondata.Mostimportantly,depositsin
manybanksandcreditunionsareprotectedbyinsuranceprovidedbytwofederalgovernmentagenciesknowasthe
FederalDepositInsuranceCorpora on(FDIC)andtheNa onalCreditUnionAdministra on(NCUA).
Federal Deposit Insurance Corpora on (FDIC)

Na onal Credit Union Administra on (NCUA)

TheFDICisafederalgovernmentagencythatinsures
depositoryins tu onsthathaveelectedforFDIC
coverageagainstloss.Thestandardinsuranceamountis
$250,000perdepositor,perinsuredins tu on,foreach
accountownershipcategory.

TheNCUAprovidesinsuranceprotec onforcreditunions.
ThecoverageisthesameaswiththeFDIC;eachdepositor
isinsuredagainstlossuptoamaximumof$250,000
againstloss.

Aslongasyoustaywithinthecoveragelimitsyourmoneyissafefromlossduetothe orfailureofthefinancial
ins tu on.Notalldepositoryins tu onsarecoveredbytheFDICorNCUA,soyoushouldcheckforcoveragebefore
deposi nganymoney.

Services Oered by Depository Ins tu ons

Depositoryins tu onsoerawidevarietyoffinancialservicestotheir
customers.Theservicesoeredandthetermsandcondi ons(suchasfeatures
andfees)willvaryforeveryserviceateverydepositoryins tu on.
Transac on and Savings Tools
Thinkabouthowyoumakepurchasesatthepointofsale.Managingalarge
amountofcash(andprotec ngitfromrisks)canbeoverwhelmingand me
consuming.Depositoryins tu onsoerservicesthatallowyoutouseyour
moneywithouthavingtohandlecash.Theseservicesareknownastransac on
andsavings tools.Theyareaccountsoeredbydepositoryins tu onswhose
mainpurposeistohelppeoplemanagetheirmoney.
Transac onandsavingstoolsmayormaynotearninterest.Interestisthepricepaid
Ifyouwanttoearnintereston
forusingsomeoneelsesmoney.Ifyoudepositmoneyinaninterestearningsavings
yourdepositslookforhigh
toolaccountyouwillbepaidinterestduringthe metheins tu onholdsyourfunds interestrates.Whenyouborrow
andusesitforitsownpurposes.Thedepositoryins tu onisessen allyborrowing moneyandhavetopayinterest
yourmoney.Eventuallyyoullseeyourini aldepositgrowover measitaccrues
lookforlowinterestrates.
interestpaidbythatins tu on.
Areyoucurrentlyearninganyinterest?Ifso,onwhat?

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2.2.1.F1

Thetwomostcommontypesoftransac onandsavingstoolsarecheckingandsavingsaccounts:
Checking Account
Acheckingaccountallowsyouquickaccesstofundsfor
transac ons.Youreabletotransfermoneyfromone
accounttoanotherordirectlytoanotherpersonthrough
theuseofpaperchecks,debitcardsorwithdrawingcash
directlyfromyourcheckingaccount.

Checkingaccountsareverypopularamongconsumers
becausetheyreducetheneedtocarrylargeamountsof
cashandareeasytouseandmanage.Somechecking
accountsearninterestbutmostdonot.

Checkingaccountsatcreditunionsareknownasshare
dra accounts.Thistypeofaccountalsoprovidesaneasy
methodforaccessingyourmoney.

Savings Account
Asavingsaccountisthemostcommontypeofbankaccount
andmaybethefirsttypeofaccountyouopenatyour
depositoryins tu on.Savingsaccountsaregenerallyfor
moneythatyoudon'tintendtousefordailyexpenses.Your
savingsaccountwillearninterestonitsbalanceandbe
storedinasecureloca on.Toopenasavingsaccount,
simplygodowntoyourlocalbankwithproperiden fica on
andasktoopenanaccount.

Asavingsaccountatacreditunionissome mesreferred
toasashareaccountandisrequiredformembership.

Hasopeningacheckingorsavingsaccountposi velyinfluencedthewayyoumanageyourmoney?Ifyouhaventopened
uponeatthispointinyourfinanciallife,canyouiden fywaysabankaccountmightinfluenceyourmoneymanagement
habitsinthefuture?

Addi onalservicesoeredbymanydepositoryins tu onsinclude:

Credit

Financial Advice

SafeDeposit Box

Creditproductsallowyoutoborrowmoneyfromthe
financialins tu oninexchangeforyourpromisetorepay
thosefundsinthefuture.Depositoryins tu onsmay
provideavarietyofcreditproductssuchasloansforthe
purchaseofahouse,autooreduca on.Manydepository
ins tu onsalsooercreditcardstotheircustomers.When
youapplyforcredit,thefinancialins tu onwilldetermine
whetheryouqualifyfortheloanbasedontheirassessment
ofthelikelihoodthatyouwillrepayasagreed.The
ins tu onwillalsodeterminetheamountof meyouhave
torepay,andthepriceoftheloan,intheformofthe
interestratetobechargedontheamountofmoneyyou
owe.Byagreeingtotheseloantermsyouwillagreetopay
thedepositoryins tu onbackthemoneyborrowedplus
interest.

Depositoryins tu ons
mayalsooer
informa on,adviceand
assistanceregardinga
widerangeoffinancial
relatedtopicsincluding
investmentsandestate
planning.

Asafedepositboxisasecured
boxatadepositoryins tu on
thatyoucanusetostore
valuablepersonalitems.Many
peopleusesafedepositboxes
tostoreimportantpaperwork
suchasbirthcer ficates,
SocialSecuritycardsandwills.

Special Needs Payment Instruments

Travelerschecks,cer fiedchecks,cashierschecksand
moneyordersareallspecialpaymentinstrumentsthat
haveaspecificfunc onandareavailableatmost
depositoryins tu ons.

Touseanyoftheservicesoeredbydepositoryins tu ons,call,visit,emailorsearchthedepositoryins tu onswebsite

todeterminewhatstepsareneededtousetheserviceyoudesire.Youmayberequiredtohaveanaccounttousetheir
services.Ifyouareundertheageof18,inmostcases,youwillneedaparent/guardiansignaturetoopenanaccount.
Whichdepositoryins tu onserviceswouldbethemostimportanttoyou?

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2.2.1.F1

Addi onal Features of Depository Ins tu on Services

Theservicesoeredbydepositoryins tu onsmayoercertainfeaturessuchasonlinebanking,mobilebanking,debit
cards,ATMsandcontactlesspayment.
Online banking
Adepositoryins tu onmayoeronlinebanking,alsoknownasInternetbanking,asafeatureoftheirservices.
Onlinebankingallowscustomerstocompletecertaintransac onsfromasecuredInternetsitebyusinga
usernameandpasswordfromanyplaceintheworldwithInternetaccess.Onlinebankingac vi esinclude
accessingaccountinforma onandstatements,transferringmoneybetweenaccounts,payingbillsandapplyingfor
credit.Inaddi ontopayingbillsonline,consumersmayalsobeabletosetuparecurringbillpayment.Thepaymentwill
occurautoma callyonaspecificdateeachmonthwithoutthecustomerhavingtowriteacheckorini atethepayment.
However,ifyouuserecurringpaymentitisyourresponsibilitytomakesurethatyouraccounthassucientfundsinitto
covertheamountoftheautoma cpayment.
Whatisoneadvantagetoonlineand/ormobilebanking?
Manydepositoryins tu onshavedevelopedappsthat
allowonlinebankingaccessfromdevicessuchas
smartphones,tabletsandothermobiledevices.Thisisa
formofonlinebankingknownasmobile banking.
Debit cards
Adebitcardiselectronicallyconnectedtothecardholdersdepositoryins tu onaccount.Debitcardsallowcustomers
easyaccesstomoneyintheirsavingsandcheckingaccountseitheratthepointofsaleorthroughanautomatedteller
machine(ATM).Asapaymenttool,debitcardsfunc oninthesamemannerasacheck,butdebittransac onsarefaster
andmoreportablebecausetheyareelectronic.Debitcardsalsoallowcustomerstowithdrawcashorelectronically
accesstheiraccountstotransferfundsbetweenaccountsorviewbalances.Inmostcases,debitcardsrequireusinga
personaliden fica onnumber(PIN)orsignaturetoperformtransac ons.ThePINorsignatureauthorizestheuserofthe
debitcardtoaccessthemoneyinthecorrespondingaccount.
Automated teller machines (ATMs)
AnATMisamachinethatallowsindividualstocompletecertaintransac onsfromthemachine
withouthumanassistance.ATMsareaccessedviaanATMcard(whichisusuallyalsothecustomers
debitcard)plusthePINthataccompaniesthatcard.ATMsallowcustomerstowithdrawand
depositmoneyintotheiraccount(s),aswellasmakeaccounttransfersandviewaccountbalances.
Thenumberandloca onofATMsvariesbydepositoryins tu on.
Contactless payment
Contactlesspaymenttransac onscanbecompletedwithnophysicalconnec onbetweenthepaymentdeviceandthe
physicalpointofsale(POS)terminalorstoreclerk.Ifadepositoryins tu onoerscontactlesspaymentop onsthenyou
willreceiveadebitcard,creditcard,orsomeothertypeofelectroniccardthatallowsyoutosimplywavethecardin
frontofasensortomakeapurchase(some mesyoumayhavetoalsoenteraPINforthepaymenttoauthorize).This
allowsforfastpaymenttransac ons,butnotallmerchantshavethetechnologytosupportcontactlesspayment.
Whatfeaturesofdepositoryins tu onserviceswouldma ertoyou?

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2.2.1.F1

Fees
Depositoryins tu onso enchargefeesforcertainservices.Feelevelsareimportanttoconsiderwhenchoosinga
depositoryins tu onforyouraccounts.Examplesoffeesinclude:
Overdra fee Afeechargedifyou
withdrawmoremoneyfromyour
accountthanisavailable.Some
depositoryins tu onsoeroverdra
protec onthathelpsyouavoid
overdra feesifyouexceedyour
accountbalance.

ATM fees Yourdepository

ins tu onmaychargeyoufor
usinganATMthatbelongsto
anotherdepositoryins tu on.

Minimum balance fees Someaccounts

requireaminimumaccountbalance.Ifyou
gobelowthatbalanceyouwillbechargeda
fee.Beforeopeninganaccountaskifthere
isaminimumbalanceamountand
determineifyouareOKwiththeminimum
balanceamount.

Depositoryins tu onso enchargemanyothertypesoffees.Feescanvarygreatlyacrossdepositoryins tu ons.

Researchingpoten alfeesthatyoumayfaceasanaccountholderisanimportantpartofchoosingadepository
ins tu on.Askforalistoffeeswhenopeninganaccount.Mostfeeschargedforitemsandtransac onscanbeavoided
ifyoumanageyouraccount(s)well.

Choosing a Depository Ins tu on

Nowthatyouknowaboutthemanybenefitsandservicesadepositoryins tu oncanoer,youmaywanttobecomea
customer.Themostimportantfactorwhenchoosingadepositoryins tu onistoselectonethathelpsyoumeetyour
financialgoals.Youmayhavemorethanonetypeofaccountwithasingledepositoryins tu onoropenaccountswith
mul pleins tu ons.
Considerthefollowingfactorswhenchoosingadepositoryins tu on(s)thathelpsyoureachyourfinancialgoals:

Feescharged

Productsandservicesoered

Typeofdepositoryins tu on

Interestratesonloansanddeposits

Loca on

Featuresoered

Insuranceofdeposits

Whattwofactorsaremostrelevanttoyouwhenchoosingyourdepositoryins tu on?

Depositoryins tu onsareavaluabletooltohelpyoumanageyourmoneyinaposi vemanner.

Chooseadepositoryins tu onthatwillhelpyoureachyourfinancialgoals.
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