Banks vs Credit Unions
What is the main difference between a bank and a credit union?
Banks are for-profit institutions open to anyone, while credit unions are non-profit and serve members only.
Which savings tool is primarily used for daily transactions?
Checking Account
What is an overdraft fee?
A fee charged when you spend more than your account balance.
Why should you save money?
For financial security, emergencies, and future expenses.
What is a check, and how is it used?
A written order directing a bank to pay money from the writer’s account to a recipient.
What is the primary goal of a commercial bank?
To make a profit by charging fees and interest on loans.
Which savings tool typically offers the highest interest rate but has the least liquidity?
Certificate of Deposit (CD)
How can you avoid fees when it comes to a money market?
Do not go under the minimum balance & do not withdraw too many times (most banks will have a limit per month).
How much of your monthly income is recommended to be saved?
20%
OR
6 months worth of expenses
What is 2 things to consider when choosing a bank? (we learned 4).
Explain.
- Location
- Insurance
- Services Offered
- Service Fees
What type of insurance protects deposits at banks? What about credit unions?
Banks: FDIC (up to $250,000), Credit Unions: NCUA (up to $250,000).
What is the main advantage of a money market deposit account?
It offers higher interest rates than a checking or savings account while maintaining some liquidity.
How can you avoid ATM fees?
Use your bank’s ATMs or choose a bank with fee-free ATMs.
What is the “pay yourself first” saving strategy?
Automatically putting money into savings before spending on anything else.
If my expenses per month are normally $1,500, how much should I have in my savings?
$1,500 × 6 months = $9,000 in your savings.
Give one advantage of using a credit union over a bank.
Lower interest rates on loans, fewer fees, or a more community-focused approach.
What is a common restriction of a Certificate of Deposit (CD)?
You cannot withdraw funds before the maturity date without paying a penalty.
Why do banks charge fees?
To generate revenue and cover operating costs.
If I offer you $2,000 today vs $2,000 in 2 years, which would you accept? Why?
Today!!! The dollar value consistently goes down with time, so it is worth more right now.
Bonus: You can keep it in a CD for 2 years and let it grow with interest.
What's the difference between a CD & a Money Market?
- A money market has more liquidity
- A CD has a fixed term before withdrawal
- CD's offer higher interest rates
Name two services that both banks and credit unions offer.
Checking accounts, savings accounts, loans, financial advice, or safe deposit boxes.
What's the difference between a savings account and a money market account?
A Savings Account: A basic account for storing money with a extremely low rate and easier access but usually no debit card access.
A Money Market Account (MMA): Offers higher interest, limited withdrawals and often requires a higher minimum balance.
What is a wire transfer fee?
How can you avoid this?
A wire transfer fee is a charge for sending or receiving money electronically between banks.
To avoid it, use free services like Zelle or choose banks with no fees.
Why does the time value of money encourage saving early?
Money today is worth more than the same amount in the future due to interest and investment growth.
What is one major downside of keeping all your money in cash instead of in a Money Market or CD?
You miss out on earning interest, meaning your money does not grow over time.