TYPES OF BANKS
There are 3 main types of banks.
Finally, payday lenders and check-cashing services. These are not banks. While they do provide some banking services, they also come with high rates and fees. Payday lenders allow you to receive a loan in the form of cash before your payday. Check-cashing services cash your paychecks for a fee. As convenient as this sounds, payday loans and similar services usually charge extremely high fees and interest rates - sometimes over 400% - which can make them more difficult to pay back over time. Because of this, it's important to weigh the short-term and long-term costs of using these services and consider what other free or low-cost banking options are available to you.
- Retail Bank: Offers services like savings and checking, mortgages, personal loans, debit and credit cards. Deals directly with individual consumers and also deals with important businesses.
- Credit Unions: For non-profit cooperative banks that are privately owned and controlled by their members. Credit Unions offer many of the same services as retail banks, but to join a credit union, you have to become a member. This is usually restricted to people living or working in a certain area or working for a specific organization or industry. For example, there are credit unions whose membership requires that you be a student or employee at a university or be a member of the military.
- Online bank: Banks you can't see in person because they only exist online. Online banks are similar to retail banks. You can access services like savings and checking accounts, and debit and credit cards, but you won't find a physical location near you. Instead, you'll have to fire up your web browser or download an app, because they do their business online.
Finally, payday lenders and check-cashing services. These are not banks. While they do provide some banking services, they also come with high rates and fees. Payday lenders allow you to receive a loan in the form of cash before your payday. Check-cashing services cash your paychecks for a fee. As convenient as this sounds, payday loans and similar services usually charge extremely high fees and interest rates - sometimes over 400% - which can make them more difficult to pay back over time. Because of this, it's important to weigh the short-term and long-term costs of using these services and consider what other free or low-cost banking options are available to you.