Depository Institution

A depository institution is a financial institution in the United States that is legally allowed to receive and store funds from the public. Commercial banks, credit unions, savings banks are all depository institutions.

Although these businesses can have their own sets of rules and customers, there are a few things that they share:

When working with these financial institutions, you can expect to receive any deposited funds when you need to use them. In most scenarios, newly deposited funds will have a one or two day period before you can access them. These financial institutions have safeguards, so you can rest assured that your funds are safe and available when you need them.

You may have to pay a monthly fee to store your money with them. In some cases, you will receive perks such as interest payments, overdraft protection, and various offers catered to your banking activity.

Federal law requires certain disclosures from these financial institutions for consumers opening up checking accounts or savings accounts (including accounts such as CDs, Individual Retirement Accounts (IRAs), Health Savings Accounts (HSAs), High Yields Savings, Payable on Death (POD) or Totten trust accounts, etc.). Your institution will send these disclosures right before you sign up (electronically or in person). 

Commercial Banks

Commercial banks are the most popular forms of depository institutions you will encounter. In addition to checking and savings, most will offer loans or lines of credit. In most scenarios, there will be a small fee to open a checking account. Here is what they will ask that you have with you:

  • At least two forms of government-issued photo ID
  • A social security number or TIN
  • Proof of address

Banks may ask for additional information regarding other accounts, such as a CD or savings.

Credit Unions 

It’s important to know the difference between banks and credit unions. Unlike commercial banks, credit unions are non-for-profit depository institutions that serve their members. Members who use services also own the credit union—adding a more community-based approach to banking.

Savings Banks 

A savings bank focuses on more long-term savings goals for its consumers.

What Are Some Perks That Come From Having a Depository Institution?

Here are some of the reasons that people choose these types of accounts to deposit their everyday pay and their savings:

  • Security—This is one of the primary reasons you may want to have an account with a depository institution. When in an account, your money is safer from theft and wear and tear. Additionally, your money the Federal Government ensures your money (usually up to $100,000)
  • Convenience—You can use debit cards/bank cards almost anywhere in stores and online. Additionally, having a checking account can make it extremely easy to pay those bills or other monthly payments that require online payments. 
  • A Cheaper Alternative for Managing Money—Without a bank or credit union account, services like check cashing, wiring money, and paying bills can become very expensive. These accounts offer various money management services for free or minimal costs.
  • Growing Your Financial Portfolio and Borrowing Money—Credit unions and banks help you establish proof of income, which is a necessity for major purchases like a car or a home. And for credit cards or loan options. These institutions may also offer you credit if you deposit/store money with them and show good financial habits. Otherwise, you may not have qualified for the funds outside of being a customer of that institution.

Choosing a Depository Institution

There are a ton of depository institutions out there, and before choosing one to store your money in, here are a few things to consider:

  1. Availability of Services — It will be worth checking out the kinds of accounts, loan options a bank or credit union has for their customers. Also, check whether they offer their services online, over the phone, and in -person.
  2. Costs for You — An institution will let you know about any initial account fees to open up a deposit account with them. However, make sure to review monthly payments, minimum balance requirements and their penalties, transfer fees, ATM fees, overdraft fees, etc.
  3. Security Measures—Another essential variable to consider is how secure a financial institution is when banking with them. Although most institutions have insurance for loss of funds, your personal information may be at risk when basic security measures are not in place.
  4. Ease of Deposits, Withdrawals, and Transfers — Ask about features that make transactions easier. For example, learn about direct deposit and mobile check deposits. Consider withdrawal amounts and limits and whether you can transfer money to another person or account, if needed.
  5. ATM Availability—ATMs are going to be the easiest way to get cash from your account. And accessing those funds from a third-party ATM can mean fees, and depositing can mean a longer wait to access your funds. And so, it may be worthwhile to think about how accessible your bank’s ATMs are.
  6. Interest rates on savings —If you are focusing primarily on savings, then pay attention to the amount of interest you will be getting from different institutions and the different accounts they have.
  7. Customer Service, Financial Advice, and Investing— Customer service may not seem like a big deal at first. Still, when an emergency happens, customer service is essential to solving any issues. Some depository institutions also help you track and build your credit, offer personalized financial advice like budgeting, and help with investing.

Depository institutions are any financial entities that can accept deposits from the public into checking or savings accounts. Commercial banks and credit unions are the most common types of depository institutions out there. While savings banks are more specialized in growing your deposited money. These financial institutions offer an array of benefits for their consumers, including easy access to funds, security, and potential offers and rewards.

They’re great for a number of reasons, whether you want to work on saving up, or you need an account because you’re applying for a cash advance loan. 

The cash you need at ninja speed.