Banking 
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The Basics of Banking Explained

This is the first edition of our Personal Finance Foundation Series where I discuss the very basics of foundation-type personal finance topics. The topic of this post is Banking.

I was fortunate that my first real experience with banking was with a local credit union. Credit unions are really great about welcoming new members and educating them about everything. Commercials banks, while still cordial, simply don’t offer the same types of services that credit unions do. My mom and I opened a joint banking account a local credit union when I was fourteen and I was excited to even have a laminated blue card with my account number and credit union phone numbers! I still have the card in my desk drawer, I still have the account open, and it was a nice warm and welcoming introduction to the banking world.

That, however, seems to be atypical. Many people are introduced to the banking world either through the nastiness of credit cards or by walking into the antiseptic branch of a major bank. You open an account, direct deposit your paycheck, and feel like a number in a database. There is no education, no explanation, just an assumption that “you’ll figure it out eventually.” Well, unfortunately that isn’t enough because “figuring it out” usually results in you being dinged on fees so let’s start from the basics and go through what banking is.

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 Banking 
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Ecology of Banking: Credit Unions, Banks & Thrifts

For all intents and purposes to the consumer, there is little difference among thrifts, commercial banks, and credit unions. The financial services they all offer will be similar and you probably don’t even know if the financial institution you’re banking with is a thrift or commercial bank (Washington Mutual is technically a savings and loan and the largest one). In fact, the only real notable difference between thrifts/banks & credit unions has to deal with depository insurance. Thrifts and commercial banks are covered by FDIC, credit unions are covered by NCUA, though both are covered to the same limit of $100,000 per person per financial institution.

Now, for the academics and trivia buffs out there, here’s a little more on their differences.

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