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earns is returned to its members in the form of lower banking fees, higher rates on accounts, or lower rates on loans and credit cards . Two well-known and large credit unions are the Navy Federal Credit Union and Boeing Employees Credit Union.
Savings and Loans Savings and Loans (S&Ls) are specialized banks originally created to promote homeownership and savings. There used to be thousands of active S&Ls in the U.S., particularly after World War II when there was a huge influx of GIs returning from the war and looking to buy a home with their GI Bill military benefits. S&Ls have faded from the financial institution landscape, with less than 1000 left in the U.S. They are also referred to as thrifts and now function in much the same way as banks but with an emphasis on making home loans.
Ever heard of an investment bank? It is not a bank for consumers or day-to-day business banking needs. In fact, it’s not really a “bank” at all. It is a financial institution that specializes in managing large and complex financial transactions and stock offerings for corporate clients .
II. Bank Products and Services Now that you know a little about the different kinds of banks, let’s check out some of the popular products and services that banks offer for depositing and saving your earnings. Savings Account Interest Earning. A savings account is a deposit account that earns interest. Banks expect that the money deposited into a savings account will stay there for awhile, so they are willing to pay interest on it. Interest means that the bank pays the account holder a small percentage of the account’s value every month . You won’t see significant interest rate differences between banks on savings accounts. This is because interest rates for bank deposits are tied to the discount rate set by the Federal Reserve Bank, which all U.S. banks are subject to. A discussion of the discount rate is beyond the scope of this course, but be aware that although interest rates are similar from bank to bank, they often compete for deposits by offering more attractive or more liberal account terms. Keep in mind that a savings account is a product . You can shop around for the account that has the best terms and suits your personal needs. Not for Daily Use. Savings accounts are not considered to be transactional accounts . In other words, they are not supposed to be used for funding daily expenses. They are intended to hold money that can sit unused for an extended period of time . Because of that, savings accounts do not come with check writing ability or a debit card enabling you to make purchases at the mall. A debit card comes with the account but, generally can only be used to deposit and withdraw funds at your bank, and not to make purchases. Back Up Plan. Regardless of your financial circumstances, a savings account is fundamentally important to your financial health. It’s like your financial backup plan. The money stashed in a savings account can provide much needed relief in the event of an emergency, such as unexpected medical costs, car repairs, veterinary charges (c’mon what if your puppy got sick?) or sudden loss of a job. People often have savings accounts for specific goals such as a holiday gift account, vacation account, or college fund . PRODUCT PREVIEW
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Chapter 2 | Battler of the Banks
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