Banking Basics - Financial Regulation
Financial institutions are depository institutions such as banks, savings banks, credit unions, and trust companies.
Banks are corporations (privately owned or publicly traded) that exercise banking powers under a national charter (national bank) or state charter (state bank). The primary regulator of a national bank is the Office of the Comptroller of the Currency (“OCC”). The primary regulator of a state bank is the banking commissioner of the state in which the state bank was formed, for example, the Commissioner of Financial Regulation is the primary regulator of a Maryland-chartered bank. National banks are easily distinguished because they have the word “national”, “national association”, or “N.A.” in their name.
All banks must maintain deposit insurance issued by the Federal Deposit Insurance Corporation (“FDIC”). FDIC insurance covers checking accounts, savings accounts, money market deposit accounts, and certificates of deposit. FDIC insurance does not cover other financial products and services that banks may offer, such as stocks, bonds, mutual funds, life insurance policies, annuities, or securities. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category (the FDIC's Electronic Deposit Insurance Estimator (EDIE) allows you to estimate insurance coverage for multiple accounts, accounts owned by more than one person, etc., at one financial institution).
Besides deposit accounts, banks provide other services such as loans, and small business services.
Other State Banks: A number of out-of-state banks operate branches in Maryland. Those banks are regulated by the state banking department for the state where each bank is headquartered. Please search the Federal Deposit Insurance Corporation's Bank Find database to find out where your bank is chartered, and then contact the appropriate state banking regulatory authority.
Savings banks or thrifts are corporations (mutually owned by depositors and borrowers, or owned by shareholders) that exercise banking powers under a national charter (federal savings bank or federal thrift) or state charter (state savings bank). Many federal savings banks and savings and loans are distinguished by the words "federal savings bank", "federal association", "federal", or "federal savings and loan association", or the initials "F.A.", or "F.S.B." or "F.S.L.A." in their name. Federal Savings Banks/Savings and Loan Associations are regulated by the OCC.
The primary regulator of a state savings bank is the banking commissioner of the state in which the state bank was formed, for example, the Commissioner of Financial Regulation is the primary regulator of a Maryland-chartered savings bank. All savings banks must maintain deposit insurance issued by the FDIC (coverage is the same as noted above).
Credit unions are nonprofit corporations owned by their members. Credit unions exercise credit union powers under a national charter (federal credit union) or state charter (state credit union). The regulator of a federal credit union is the National Credit Union Association (“NCUA”). You can reach the NCUA at 1-800-755-1030. The regulator of a state credit union is the bank commissioner in the state in which the credit union was formed, for example, the Commissioner of Financial Regulation is the regulator for Maryland-chartered credit unions. Federal credit unions generally are distinguished by the word “federal” or “FCU” in their names. All credit unions must maintain deposit insurance. Deposit insurance is provided by either NCUA or American Share and its wholly-owned subsidiary Excess Share Insurance Corporation (ESI). ESI provides private share insurance for credit unions across the U.S.
Credit unions may do business with members only. Credit Union membership is based on a common bond (e.g. living in a particular geographical area or having the same employer). Refer to the credit union for questions regarding membership eligibility.
Trust Companies serve as an agent or trustee for a business entity or individual with the purpose of managing, administering and eventually transferring assets to a beneficiary.
Having a deposit account at a financial institution has its benefits. Financial institutions can help you keep your money safe and secure, thereby reducing the need to keep all your cash in hand that could be stolen or lost. Having an account at a financial institution also helps you keep track of your spending by allowing you to track your transactions from your monthly statement. Further, online and mobile banking offers the convenience of not having to visit your financial institution’s branch office.
Financial Account Fees
Although having a deposit account at a financial institution offers convenience and security, it is important to remember that fees and charges can reduce the amount of money you have on deposit. A financial institution must disclose its fees to you at the time of account opening. Some account types are charged a monthly service fee if the account balance falls below a certain amount. Sometimes the fees are waived based on account balance or whether you have direct deposit (e.g. payroll check, Social Security payment, pension distribution). You should understand the types of accounts and fees associated with those accounts before you open a deposit account. Consult your financial instruction’s fee schedule to learn more about fees charged for specific account.
Non-sufficient funds charges for transactions (including checks and debit card transactions) in excess of your account balance can also eat away at your money. Specifically, depository institutions may charge fees for each transaction that overdraws your account and the item (such as a check) that is returned to your payee. Do not assume that a transaction will be declined if your account does not have enough funds to cover your purchase. If a financial institution pays the check or debit transaction, you may be charged an overdraft fee. The most effective ways not to get charged fees or limit these fees are to read all the disclosures that come with your account, ask questions during the account opening process, and pay close attention to your available balance, never spending more than you have on deposit.
Some financial institutions have options to limit your exposure to overdraft fees by providing debit card and online banking only accounts where you cannot order or write checks. These accounts may carry a monthly fee that cannot be waived, even with direct deposit.
You also have the option of opting in or out of overdraft coverage or protection. Therefore, if you opt out, your debit card transaction may be declined at point-of-sale instead of causing your account to be overdrawn. Opting in means you could incur an overdraft penalty.
Ask your current or potential financial institution about the availability of these no-overdraft fee accounts and make sure to read the terms thoroughly including fees associated with such an account.
More information on banking basics can be found by visiting these websites:
- USA.Gov Banking Basics
- Operation HOPE Banking Basics
- FDIC’s Money Smart program online modules (English and Español)
- Helpwithmybank.gov common banking terms
- Banking & Credit Union FAQs
The Maryland Consumer Rights Coalition (MCRC) is a statewide coalition of individuals and organizations that advances and protects the interests of consumers through education, advocacy, and training programs. MCRC works to ensure fairness and safety in the marketplace. MCRC’s SOAR project connects older adults to resources to help them keep their money and find more assets as well as legal, financial, and housing assistance.
USA.gov has more information about filing a complaint against a national bank, federal savings and loans and federal savings banks or federally chartered credit union visit. You can also file a complaint about a Maryland state-chartered financial institution (state-chartered bank, credit union, or trust company) by visiting the Commissioner of Financial Regulation’s website.
The Commissioner of Financial Regulation also has a list of frequently asked questions related to the regulation of banks and credit unions in the state.