Part 1: Financial Institutions Dollars & Sense

Name that Financial

Name That Financial

Objectives Describe the differences and similarities between banks and credit unions Analyze financial institutions in order to choose the best fit for your situation

Types of Financial Institutions Section 1Financial Services and Institutions Deposit Institutions Commercial Banks Savings and Loan Associations (S&L) Mutual Savings Banks Credit Unions commercial bank a for-profit institution that offers a full range of financial services, including checking, savings, and lending savings and loan association (S&L) a financial institutional that traditionally specialized in savings accounts and mortgage loans, but now offers many of the same services as commercial banks credit union a nonprofit financial institution that is owned by its members and organized for their benefit

Banks & Credit Unions Banks Credit Unions For-profit companies owned by shareholders For-profit companies owned by shareholders Not-for-profit institutions owned and controlled by their own customers, who are known as members Not-for-profit institutions owned and controlled by their own customers, who are known as members Managed by a member and volunteer board of directors, who are elected by other members Managed by a member and volunteer board of directors, who are elected by other members Managed by a paid board of directors elected by the bank’s shareholders Managed by a paid board of directors elected by the bank’s shareholders

Banks & Credit Unions Banks Credit Unions Owned by shareholders; customers do not have ownership or voting privileges unless they also own stock in the bank Owned by shareholders; customers do not have ownership or voting privileges unless they also own stock in the bank Profits benefit a small group of stockholders Profits benefit a small group of stockholders Owned by each credit union member, who has equal ownership and one vote, regardless of how much money a member has on deposit Owned by each credit union member, who has equal ownership and one vote, regardless of how much money a member has on deposit Profits are returned to members in the form of lower fees and loan rates and higher interest on deposits Profits are returned to members in the form of lower fees and loan rates and higher interest on deposits

Banks & Credit Unions Banks Credit Unions Accounts are federally insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) Accounts are federally insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) Accounts are federally insured up to $250,000 by the National Credit Union Administration (NCUA) Accounts are federally insured up to $250,000 by the National Credit Union Administration (NCUA)

Who do they serve? Banks Credit Unions Offer their services to everyone; anyone can become a customer Offer their services to everyone; anyone can become a customer To become a member of a credit union, you must meet certain common bond requirements To become a member of a credit union, you must meet certain common bond requirements Live in a certain area Live in a certain area Attend a certain school Attend a certain school Work at a specific place Work at a specific place Affiliated with a certain organization (church, community) Affiliated with a certain organization (church, community)

Comparing Financial Institutions Section 1Financial Services and Institutions Where can you get the highest rate of interest on your savings? Where can you obtain a checking account with low (or no) fees? Will you be able to borrow money from the institution—with a credit card or another type of loan—when you need it? Do you need an institution that offers free financial advice? Is the institution FDIC- or SAIF-insured? Does the institution have convenient locations? Does it have online banking services? Does it have any special banking services that you might need?

Which is Better? Depends on your situation Depends on your employer Depends on your beliefs Depends on what your family has done traditionally

YOU DECIDE! Complete the Decision Point: Banks Versus Credit Unions Worksheet after reading the article about the pros and cons of banks and credit unions. the completed worksheet to Mr. Farrar