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Deciding where you will store and manage your money is a decision that should not be taken lightly. We are here to help you navigate this decision.
Nowadays there are many options in which you could store your money. The three major financial institutions at the moment are Traditional Banks, Credit Unions and Online Banks. For the most part, these institutions are all fairly similar but each of them do have distinct offerings that might make them the perfect fit for you.
Explore Your Options
The most popular financial institutions such as Wells Fargo, Bank of America and Chase are traditional banks. Traditional banks are for-profit organizations that are owned and run by shareholders, their main goal is to maximize profits. Traditional banks normally have a multitude of physical locations for their clients, in which they offer a wide range of products and services. Both personal and commercial products are offered such as; savings accounts, personal loans, IRAs, CDs, business credit cards and business loans. When compared to other financial institutions, traditional banks tend to offer higher interest rates on loans and lower interest rates on savings accounts. In addition, they tend to implement more and higher fees when compared to credit unions. Any individual or company is eligible to open an account with traditional banks.
Smaller scale financial institutions that you might see around your community may be credit unions. Credit unions are nonprofit organizations owned by members of the union. Credit unions are similar to traditional banks but often membership is required to join, each credit union has its own requirements. Some common requirements include; live in a certain area, work for an eligible employer, affiliated with a participating organization. Credit unions aim to serve their members by offering better rates and less fees when compared to traditional banks. What distinguishes credit unions is that any profit earned from interest and account fees are reinvested in hopes of helping their members. Credit unions tend to be a lot smaller than traditional banks and have limited in-person locations. In addition, they may offer less products and services than traditional banks. However, like mentioned, their fees tend to be lower and rates tend to be better.
Online banks are on the rise and becoming more and more popular. The main distinction with these financial institutions is that everything happens online. Most online banks do not have any in person locations, the few that do have a very limited amount of locations. Online banks are popular for their convenience. One can open an account with simply their general information and from their very own computer, being able to conduct business any day, any time and from any place. Because of this, online banks are able to offer very competitive fees and interest rates on their products and services. Online banks are known for their high yield savings accounts, which may be the only product some online banks offer. However, other online banks offer more products and services such as; money market accounts, CDs and loans. Online banks also have a very large ATM network, providing access to thousands of ATMS. Online banks are great for those who don’t necessarily need that in person interaction and are okay with handling their money at home from their laptop or smartphone.
Which Is Best?
Choosing financial institutions isn't a one size fits all situation. The right institution for you is all dependent on what works for you and the needs your financial institution needs to meet. When looking at your options, make sure that the financial institutions you are looking at are insured. Traditional and online banks are typically ensured by the Federal Deposit Insurance Corporation (FDIC) and credit unions are typically ensured by National Credit Union Administration (NCUA), this insurance which can insure up to $250,000 per person. In addition, look at the interest rates and fees that are offered at the institutions. Take into account any services that you are considering, whether it be credit cards, savings accounts or CDs. All in all, these are all great financial institutions, make sure to research and understand what each of them can offer for you. If you find yourself needing any assistance, feel free to schedule a one on one coaching session!
Author:
Melissa Rodriguez
Bobcat Financial Coach
Melissa is a Bobcat Financial Coach alumnaat the University of California, Merced. Read more about her here!