Financial Literacy - Banking

​Financial Literacy - Banking

By george.shreve

Different types of Banks...

Commercial banks are for-profit financial institutions that offer a wide range of services to individuals and businesses, including checking and savings accounts, loans, and investment services.

A credit union is a not-for-profit financial cooperative owned by its members. These institutions offer many of the same services as commercial banks but often at lower fees and better interest rates.

A mutual savings bank is a state-chartered financial institution that is owned by its depositors. These banks were originally established to provide a safe place for people with small savings to deposit their money and earn interest.

A savings and loan association (S&L) is a financial institution that specializes in accepting savings deposits and making mortgage loans.

Federal Deposit Insurance Corporation (FDIC)

The FDIC is an independent agency of the U.S. government that insures deposits in U.S. banks and thrifts in the event of bank failure. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

Debit Cards and PIN Numbers

A debit card is a plastic payment card that deducts money directly from a consumer’s checking account to pay for a purchase. A PIN (personal identification number) is a security code used to authorize transactions, especially for cash withdrawals at ATMs.

​Overdraft Protection

Overdraft protection is a service offered by banks to prevent transactions from being declined when there are insufficient funds in the account. When a transaction exceeds the account balance, the bank will cover the difference, but the user is typically charged a fee for the service.

Saving Your Money

Standard Checking vs. High-Yield Savings

A standard checking account is designed for daily transactions and typically offers little to no interest on your balance. A high-yield savings account is a type of savings account that pays a much higher interest rate than a traditional savings account.

Money Market Accounts

A money market account (MMA) is an interest-bearing savings account offered by banks and credit unions. It offers a higher interest rate than a regular savings account and may have some limited check-writing capabilities. The APY (annual percentage yield) is the effective rate of return on an investment over a one-year period, taking into account the effect of compounding interest.

Certificates of Deposit (CDs)

A certificate of deposit (CD) is a savings certificate with a fixed maturity date and fixed interest rate. When you buy a CD, you agree to leave your money in the account for a specific period (e.g., six months, one year, five years) in exchange for a higher interest rate.

Common Banking Fees

• ATM fees: Charged for using an ATM outside of your bank's network.

• Check writing fees: Charged for writing a check after exceeding a certain limit.

• Transaction fees: Fees for various transactions, like using a debit card for a foreign transaction.

• Insufficient funds (NSF) fees: Charged when you try to make a purchase or withdrawal but don't have enough money in your account.

​ Common Banking Fees (cont)...

• Returned check fee: A fee charged when a check you deposited into your account is returned unpaid due to insufficient funds in the check writer's account.

• Lost card fee: Charged to replace a lost or stolen debit card.

• Overdraft fees: Charged when the bank covers a transaction that exceeds your account balance.

Direct Deposit and Account Automation

Direct deposit is the electronic transfer of a payment (e.g., a paycheck) directly into a bank account. Automating your account refers to setting up recurring, automatic transfers or payments, like paying bills or moving money into a savings account.

Payment Apps

Payment apps are mobile applications that allow you to transfer money to friends, family, or businesses using your smartphone. Popular examples include Venmo, PayPal, and Zelle.

Payday Lenders and Loans

A payday lender is a company that provides small, short-term, high-interest loans. A payday loan is a type of short-term borrowing where a lender extends high-interest credit based on your income. These loans often have extremely high interest rates and fees, which can trap borrowers in a cycle of debt.