Safeguarding Your Money: Banks Vs. Credit Unions

If you spend more than a few minutes a day watching television, listening to the radio, reading the newspaper or surfing the internet, you’ve undoubtedly been bombarded with advertisements from a dizzying array of companies offering banking services. Insurance companies, credit card companies and seemingly thousands of new credit unions are popping up every day. Everyone wants to feel secure with the financial institution they use and it’s important to do your research before choosing the right institution for you.

Who Can You Trust?

In the United States, banking regulations are stringent. In order for any entity to call itself a bank, it needs to carry a banking license. Issuance of a banking license requires FDIC approval, and the entity must show a capital reserve sufficient to meet a regulatory threshold. This minimum varies by state. Additionally, there are restrictions and requirements relating to the number and residence of shareholders.

Some jurisdictions outside the U.S., often called “tax havens,” do not have such requirements and regulations. Banks in these places are the ones you hear about on the news, referred to as “offshore accounts.” As a general rule, these offshore entities are neither desirable nor accessible to the average American banking consumer.