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Banking Services
Commercial banks are what most of us think of when we think of banking services. That's probably because it's in the name. Over 4 out of 5 students and their parents use a commercial bank for their banking needs.
Can you think of examples of commercial banks?
Answer: Regions, Wells Fargo, BB&T are a few commercial banks.
Credit unions are also a popular banking choice. Credit unions can offer better rates because of how they see customers.
At credit unions, the customers are called members and are essentially the owners of the credit union. So, when a credit union is making a profit, the profit is returned to the members in the form of better interest rates than commercial banks. By comparison, banks are usually owned by shareholders, who receive a share of the profits.
Can you think of examples of credit unions?
Answer: Alabama Credit Union, America's First Federal Credit Union, and Redstone Federal Credit Union are a few of the credit unions in our state.
There are many other types of banking and financial institutions including:
- pawn shops,
- payday lenders,
- check cashing services, and
- mortgage companies.
Banking Services
The five types of services we will be studying are
- Savings Services,
- Payment Services,
- Loan Services,
- Investment Services, and
- Electronic Banking Services.
Saving
Savings services include the following:
- traditional savings accounts,
- Certificates of Deposit (CDs), and
- money market accounts.
Payments
The most common payment service is a checking account. A checking account is how you truly manage your money.
When you deposit money into a checking account, you have multiple ways to spend your money. For example,
- writing checks,
- using a debit card,
- receiving cash from an ATM, or
- making payments or transfers online.
Loans
Many people take advantage of a financial institution's loan services. Many loans are secured. Secured loans are backed up by something of value, such as car loans and mortgages.
However, loans like credit cards are unsecured. Unsecured loans are not backed up by something of value.
What do you think happens if a person does not make payments on his or her car loan?
Answer: The bank will repossess that car.
The same thing happens with a mortgage on a home. The bank will foreclose on the mortgage if the buyer doesn't make timely payments.
Investments
Some banks offer investment services. You may want to take advantage of these if you are ready to start making market investments.
These services could be free or have an hourly fee or a commission. These services are not insured through the Federal Deposit Insurance Corporation (FDIC). The reason to consider market investments over traditional savings is the possibility of a greater return on your money.
Electronic Banking
Today, many people want more than simply a checking and savings account, so banks are offering a wide variety of ways to make banking more convenient. Banking institutions offer the following electronic banking services:
- Direct deposit: Allows money to be deposited directly from your employer into your checking or savings account.
- ATM: Stands for Anytime Teller Machines; if you don't like the banker's hours, you can stop at an ATM anytime, day or night, to receive cash or make a deposit.
- Internet Banking: Customers can sign in to their account via the internet or a mobile app to check balances and pay bills.
- Apps: Many banks now have apps for your smartphone or tablet that allow you to take a picture of a check and deposit it directly via the app.
Why Do I Need A Bank Account?
When your money is in an account at a commercial bank or a credit union, it is insured by the FDIC for up to $250,000. So, even if
- the bank is robbed,
- the bank catches fire and burns down,
- the bank merges with another bank, or
- the bank "runs out of money," your money is insured.
The United States Government, through the FDIC, will insure that your money is still there. No matter what happens, you don't have to worry about the bank running out of your money. That's a relief!
Accounts in Alabama
In Alabama, you have to be 19 to open a checking account by yourself without a co-signer.
However, that should not stop you from opening an account today. Simply open a joint account with one of your parents; then, when you turn 19, you can have them removed from the account.