Banks, Credit Unions, Savings & Loans

Banks, Credit Unions, Savings & Loans

Vocabulary • Transactional Account - A deposit account at a financial institution which allows its users to access the account quickly, safely and frequently through a variety of methods. • Savings Account - An account which cannot be used as frequently and on-demand as transactional accounts. Typically, these accounts earn interest as a result.

Vocabulary • Money-Market Account - Savings account which draws interest based on current money market interest rates • Certificate of Deposit - Money deposit at a banking institution which is loaned to the institution for a certain time with a certain rate. At the end of the term, the CoD can be withdrawn and the money plus interest will be paid.

Vocabulary • Secured Loan - a loan in which the borrower pledges an asset as collateral for the loan • Collateral - An asset which is promised to a lending institution should the borrower default on a debt. If a borrower defaults, the asset will become a possession of the lender to be sold to recoup costs.

Vocabulary • Unsecured Loan - Not secured again the borrowers assets. • Overdrafts • Credit Card Debt • Personal Loans

Commercial Banks • Financial Institution that lends money and provides transactional, savings, and money market accounts, and also accepts Certificates of Deposits

Commercial Banks • Engage in: • Issuing checks • Safety deposit boxes • Lending money • Cash Management

Credit Unions • Provide transactional, savings, and money market accounts • Issue checks and credit cards • Offer loans

Credit Unions • Only members can deposit or borrow money from a CU • Not-for-profit • Not to be confused with Non-profit • Owned by members • Members own accounts • Typically, one-vote-one-man

Savings & Loan • Specialize in savings accounts • Specialize in loans • Mostly mortgages

Savings & Loans • Also mutually owned • Borrowers and Depositors are members with full voting rights

Comparing/Contrasting

Banks vs. Others • Banks - just like any other business. Controlled by a hierarchy and owned by stockholders. • Credit Unions - Owned and controlled by account holders • Savings & Loan - Owned and controlled by account holders

Banks vs. Others • Banks are for-profit • They make money off of interest on loans • Fees • CU and S&Ls are owned and operated by and for the people who use them • Many times are community oriented • Profit is good, but not the primary goal

CU vs. S&L • Credit Unions for the most part, do the same as banks. • Savings and Loans typically do not handle transactional accounts, checking, or credit cards.

CU vs. S&L • Credit Unions typically have requirements to starts accounts • Work for a certain company • Having direct relatives already with the credit union • Savings and Loans are based upon whether or not an individual has good credit and the ability to repay loans

Videos (There is a bias) • http://www.youtube.com/watch?v=cawzTSVTP2M • http://www.youtube.com/watch?v=-rEW6ff3Zao • http://www.youtube.com/watch?v=RkQUVs-Kghg • http://www.youtube.com/watch?v=r5ND2YasEUI

Banks, Credit Unions, Savings & Loans