A bank is a financial organization that holds your money, for your financial security and your convenience. Using a bank account can protect you from theft, and provide convenience in accessing and using your money through such functions as direct deposit and automatic bill payments. Personal bank accounts are insured by the FDIC (the Federal Deposit Insurance Company) for up to $250,000. Banks also generally offer personal loans and mortgages to customers.
Banks generally offer customers two types of accounts, a checking account and a savings account. A checking account lets the customer transfer money in order to pay bills and debt. In the past, this was commonly done by the customer in the form of a check, a written document with which the customer authorized the transfer of money to the recipient of the check. Today, it is much more common for the customer to pay from their checking account using a debit card or an electronic automatic payment arranged with the bank. A savings account provides the customer with the opportunity to save money while offering a very modest rate of interest over time. Most banks allow customers to open both types of accounts and join them together for transfers of money from one to the other.
A credit union is a financial organization that operates like a bank, but is non-profit and collective owned by its members. All money earned by a credit union is returned to its members, usually in the form of higher interest rates for savings accounts and lower interest rates for loans. Credit unions vary by the terms of their membership. Some credit unions only offer membership to members of a union, or employees of a company or a geographic area, while other credit unions offer membership to anyone who can meet their criteria. Credit unions are typically local institutions that cater only to a specific geographic area, whereas banks can be a nationwide or global business. As a result, credit unions offer less conveniences (such as ATMs without fees) than banks.
The Federal Deposit Insurance Corporation is a federal agency that insures deposits in all commercial and savings banks in the United States. The FDIC was created by the 1933 Banking Act, passed by Congress in response to the financial instability of the Great Depression.
The National Credit Union Authority is a federal agency that insures deposits in all federally charted and most state chartered credit unions in the United States. The NCUA was created by the 1934 Credit Union Act, also passed by Congress in response to the Great Depression. The NCUA insures deposits in recognized credit unions with the money from the National Credit Union Share Insurance Fund.
Both agencies insure individual deposits for up to $250,000.