Financial Literacy Banks and Credit Unions

Role of a Financial Institution Safe place to put money Investments Loans Help fuel the economy Way to exchange money between parties Provide expert advice about finances

Differences Between Banks and Credit Unions Bank Owned by share holders For profit Can sell stock for capital Make a return/dividends for owners/investors No restrictions on participation Insured by FDIC Credit Union Owned by members Not for profit Do not sell stock, all capital is generated by money earned Give returns back to credit union members through lower rates and fees Has a field of membership (common bond) Insured by NCUA

What Main Products Do Financial Institutions offer? Deposits and Loans A deposit is money brought into the financial institution by a consumer for a return on investment. A loan is money borrowed by a consumer that is expected to be paid back with interest.

Different Types of Deposits and Loans Deposits Savings Accounts Checking Accounts Money Markets Certificates of Deposit IRAs Loans Auto Loans Mortgage Loans Signature Loans Credit Card Loans Business Loans

What is the Primary Way Banks and Credit Unions Generate Money? Spread: Spread is the difference between the interest rate given to the consumer on deposits and the interest rate charged for loans. For example, if a five year certificate is paying the consumer a 2% return for their money, and a financial institution is charging 5% for a five year auto loan, the spread would be 3%.

What is Deposit Insurance? Deposit Insurance is a measure implemented to protect bank and credit union depositors, in full or in part, from losses caused by the financial institution’s inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability. Banks – FDIC $250,000 Credit Unions – NCUA $250,000

How Has Technology Changed Banking? OLD Paper Ledgers Checks Paper Statements Paper Money Brick and Mortar New Computer Records Direct Deposit Internet Banking / Mobile Apps Credit and Debit Cards, ipay, etc. Internet

Items to Consider when Choosing a Bank or Credit Union Interest Rate (both deposit and loan rates) Fees charged Convenience Location Technology Deposit insurance Products offered Services offered Quality of service given

Questions??