Financial Institutions Overview Quiz

Study Notes

Retail Banks: For-profit institutions that accept deposits, providing a variety of accounts and financial services. These can be either large national banks or smaller regional banks.
Credit Unions: Nonprofit financial institutions owned by members, offering lower-cost deposit accounts and lending services compared to retail banks. Membership is often required, typically related to profession or organization.
Online Banks: Operate purely on the internet, with no physical locations. All transactions, including deposits, transfers, and bill payments, are conducted digitally.

Overdraft Protection: A service offered by banks that allows transactions to go through even if an account is overdrawn, typically for a fee.
Overdraft Fee: A $33.68 penalty charged when an account holder spends beyond their account balance, resulting in a negative available balance.

Banks generate revenue through interest on loans, ATM fees, account fees, and overdraft fees.
Common penalties include overdraft fees which can accumulate quickly if not managed.

Avoid banks that impose overdraft fees to prevent unnecessary financial strain.
Credit unions generally offer better terms with fewer fees and potentially higher interest rates on savings.

Retail banks handle traditional banking needs, while online banks streamline services digitally, enhancing convenience but lacking physical branches.
Banks may promote credit cards and personal loans, aiming to increase customer debt, which generates additional profits through interest payments.

Consumers should be wary of using services like overdraft protection due to the associated costs.
It is advisable to avoid products tied to debt to maintain financial stability.