Financial Institutions: What''s the Difference?
There are a lot of places where you can put your money. Be sure you know the differences between them. The three major institutions you will see are banks, credit unions and payday lenders/check cashing.
Banks are for-profit financial institutions. Most are publicly traded and owned by their stockholders, who influence company decisions and share in the profits. Banks are used by customers and most anyone can have an account.
Credit unions are cooperative, not-for-profit organizations. After expenses are met, all profits go back into the credit union, resulting in fewer fees, lower loan rates and often higher dividends. Everyone who has a share account owns a piece of the credit union and has a say in how the credit union is run. One must fit into the field of membership to use a particular credit union.
Payday lenders are institutions that often prey upon people of limited means. They offer loans to consumers in exchange for repayment when the borrower gets paid or receives a government check, usually within two weeks. These loans almost always carry a hefty fee. There is no way to save money at these institutions.
Avoid payday lenders at all costs, and for financial products with you in mind, turn to your credit union.
You’ve saved a little bit of money. Now, where should you put it? It depends. Some options are riskier than others, some are more accessible and some will earn you more money. Before you put your cash in one of these investments, weigh these factors:
Liquidity means how quickly and easily you can take your money out of an account or investment and turn it back into cash. With some investments, you may have to wait until a maturity date before you can get to your money or pay a penalty for withdrawing your funds early.
Money in the credit union is typically insured up to $250,000 or more. If anything happens to your savings, money market or certificate account, your money will be replaced. U.S. Savings Bonds are also insured. If you invest in the stock market or buy mutual funds, this is not the case.
Risk and Reward
There is risk with mutual funds and stocks because no one insures your investment. If the stock price drops, you lose money. However, if the price rises, you may earn a large amount of cash.
Credit union savings accounts typically have little or no fees. There’s also no fee to purchase savings bonds. Mutual funds, on the other hand, typically have management fees. Also, stock market trading fees are assessed when stocks are bought or sold.
Keep Your Card Safe
Never leave your card where it might easily be stolen.
Never write your personal identification number (PIN) on your card or even near it.
Never disclose your PIN to another person.
Don’t store your card next to another credit card with a magnetic strip. Close proximity may erase the magnetic coding.
Always notify both your credit union and the police immediately if your card is stolen.