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Banking With the Best Banks

There’s so much to be said about banking, and so many different elements to it, that sometimes it’s easy to take for granted that it plays such a big role in our everyday lives. Every time money exchanges hands, or a transaction is made, banking takes place. No matter how big or small the denominations are, the way we bank our money has a great influence on the economy — by paying or investing in goods and services, banking determines supply and demand, drives commerce, and decides market value.

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Banking, in a word, is also used to describe the products and services we can receive from a financial institution, like a bank, lender or credit union. Banking has become much more sophisticated since it was formalized (the oldest bank in Siena, Italy, for example, dates back to 1472), but the basic principles remain the same — it’s the act of spending and saving, borrowing and loaning, buying, selling and investing. In the 21st Century, technology has given us more autonomy with online banking, allowing us to manage our bank account right from our computer screens or cellphones from the best banks.

Types of Bank Accounts

There are many different types of financial products on the market today to choose from that make the banking industry rich with choices to better our own personal finances. You might be looking to save or invest money, finance a car or home, or access funds through a checking account — most banking services can be divided into deposit and loan products.

In banking, it’s important to remember that interest plays a significant role for the banker and the consumer. With a deposit product, like a savings or checking, account holders can earn interest; the amount one receives is calculated according to a figure called an APY, or Annual Percentage Yield. For loans, a banker or lender charges a borrower interest to pay back; in this case, the rate is called an APR, or Annual Percentage Rate.


Savings: A savings account is a place to safely deposit and store money with the intent of withdrawing at a later date. There are many benefits and perks of opening a savings account — financial institutions incentivize them by offering bank account holders a specific interest rate, where depositors can earn extra dividends simply from having “money in the bank.” The higher the interest rate, the higher the return. Savings accounts are popular because they provide easy accessibility and liquidity to your money, compared to certificates of deposit or other investment accounts, which often come with penalty fees if withdrawals are made before a certain time period.

Checking: Checking accounts are a convenient way to keep immediate finances in one easy-to-access place for paying monthly bills and other regular expenses. Many checking accounts give the option of writing physical checks, paying through a debit card, and linking direct deposit. Similar to a savings, high-yield checking accounts earn interest, too, a combination of savings and checking in one.

CDs, IRAs and Investments: Banking also includes other deposit products that are time shared, like certificates of deposit, a savings account where money matures over a fixed, set period of time. Because money in a CD is not designed to be accessible for quick withdrawal, interest rates are higher and yield the account holder more money. IRAs and 401(k)s are also other banking products which are useful for saving for retirement. Other investments, like putting money into stocks, bonds funds and more, are great ways to turn money around in the long-term.


Auto and MortgageA major part of banking is lending — when a party loans money to a borrower with the understanding that the funds will be paid back, with added interest on top of the principal. It’s cost prohibitive for many people to pay for a new car or house in full — that’s where lending comes in. With a loan, a person is allowed to drive off in their car or move into their house and pay off the cost over time to the bank, credit union or lender they’re affiliated with. Loan interest rates and financing terms vary. In real estate, for example, homeowners may opt for fixed-rate mortgages (the APR remains fixed for the life of the loan), or variable (interest starts off fixed temporarily, switching to a variable, or fluctuating, basis).

The Best Banks and Credit Unionsbanks or credit unions

Both operate on similar terms with some differences. Banks and credit unions are financial institutions where deposit and loan products can be obtained. Because national banks are bigger than credit unions, they have the financial backing to offer higher interest rates, better customer incentives, and more branch locations. Credit unions, on the other hand, are nonprofit cooperatives where account holding members become shareholders in the organization. So while a credit union may be smaller in scope than a great deal of banks, customers have more stake, or share, in the organization’s financial future.

With both types of banking establishments, all deposits up to $250,000 are insured under federal law — for banks, the insuring agency is the Federal Deposit Insurance Corporation, and for credit unions, the National Credit Union Administration.

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Banking Rates

With an economic recession looming on the horizon, many people have been rattled by recent job losses and a decline in most housing markets. But curiously, the outlook for interest rates may actually be improved by recent developments in the economy. With easing inflation, not only housing prices, but also yields on treasury bonds, tend to go lower. Since 30 year fixed rate mortgage rates usually track with yields on treasury notes, you may find the lowest interest rates on loans during a recession.

The Federal bank bailout may also keep interest rates low in the coming months. In November, when the Federal Reserve announced its plan to buy up debt and mortgage-banked securities from the distressed mortgage lenders Fannie Mae and Freddie Mac, that also reduced those lender’s financing costs, enabling them to pass on savings to consumers in the form of lower interest rates.

If you are shopping for a home loan, now may be a good time to compare interest rates and find the best rates on home loans.

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