Did you know that one in 13 households in the U.S. is unbanked? That's 9.6 million households that aren't taking advantage of the services offered by financial institutions. The Federal Deposit Insurance Corporation (FDIC) also found that in 2013 there were a staggering 24.8 million underbanked households, meaning they had bank accounts but also used alternative financial services. Banking – all the services offered by a bank or credit union – allows individuals to deposit funds, transfer money and complete transactions in a secure place with fair terms. Knowing how financial institutions operate and what services they provide is crucial to making the most of your money.

Before delving into the nitty-gritty of how financial institutions function, it's important to understand the difference between the two major types of financial institutions and what services they offer:

  • Banks are for-profit public companies owned by shareholders who have purchased company stock. Banks are federally insured by the FDIC. Compared with credit unions, your access to banks is generally greater and you have a wider range of services as an account holder. If you're looking for an institution that offers online and mobile banking or international ATMs, banks are often better.
  • Credit unions are nonprofit cooperatives controlled by member-owners. They're also insured, but by the National Credit Union Administration. With credit unions, you may be able to access lower cost services and get higher interest rates on savings. If you want high rates and low fees, credit unions may be a good option.

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