Do you do your saving at a bank, a savings and
loan, or a credit union? Is it a national bank or state-chartered?
It can be confusing, but we can help you better understand the country's
To begin, the Federal
Reserve is the United States' central bank. It controls the
flow of money in and out of banks and maintains the stability of
the financial system. All national banks must be members of the
Federal Reserve. Membership is optional for state banks.
Commercial banks have traditionally been the largest source of loans
to small businesses. They also make consumer loans, including mortgages,
and offer credit cards, deposit products and checking accounts for
Thanks to deregulation, banks can offer insurance
and investment products such as mutual funds and IRAs. Many banks
also offer trust services, estate planning and asset management.
Banks vary in size from megabanks with hundreds of
branches nationwide to small community banks that specialize in
serving the needs of the local clientele. Many banks are publicly
held corporations. Their principal goal is to make money for their
National banks are chartered, regulated and supervised
by the Office
of the Comptroller of the Currency; headquartered in Washington,
D.C. National banks have "National" or "N.A."
in their name.
State banks are chartered, regulated and supervised
by their state's banking division. The Federal Deposit Insurance
Corp., is the federal regulator of state-chartered banks that don't
belong to the Federal Reserve System.
Thrifts have come a long way from the days when they
only offered savings accounts and mortgages. Today's thrifts offer
checking accounts and provide business and consumer loans as well
Thrifts can be owned by their shareholders (stock
ownership) or by their depositors (mutual ownership). They can be
either federal or state chartered.
While there are some differences between savings banks
and savings and loan associations in terms of how they are set up,
Congress has removed all differences between the federally chartered
facilities as to the kinds of loans and investments they can make.
of Thrift Supervision is the primary regulator of all federal
and many state-chartered thrift institutions, which include savings
banks and savings and loan associations.
Credit unions are nonprofit, cooperative financial
institutions. Traditionally, people with a common bond have formed
them -- they work in the same industry or are members of a particular
workers' union, share the same religion, etc. Today, the membership
restrictions have softened significantly. Many credit unions simply
require that you live or work in a certain geographic area in order
to become a member.
The vast majority of credit unions in the United States
are federally chartered or state chartered credit unions that are
Credit unions frequently offer higher interest on
deposit products than banks or thrifts; and they have a tendency
to offer loans at lower rates. Credit unions are exempt from federal
Credit Union Administration is the federal agency that charters
and supervises federal credit unions and insures deposits in federal
credit unions and state credit unions that are federally insured.
Deposits of member institutions are insured up to $100,000 per customer
(individual or business.)
Online banks, which usually have no brick and mortar
branches, first gained attention by offering higher rates on deposit
products than traditional banks. While that is still true to some
extent, the rate differences are not as significant as in the past.
Most bank Web sites have an "About Us" page
that describes the institution. Look for information regarding the
official name, their charter, address of the bank's headquarters
and information about its insurance coverage from the FDIC.
The FDIC warns that not all banks operating on the
Internet are insured by the FDIC. Many banks that are not FDIC-insured
are chartered overseas. If you choose to use a bank chartered overseas,
it's important to know that the FDIC may not insure your deposits.
Check with your bank or the FDIC if you're not certain.