So What Are the Different Financial Institutions That Serve as Alternative to Banks
Like it or not, money is an important and essential part of our lives and always will be. We need it to eat, live, travel and so many more things. Sometimes in the past, it has been deemed past to be obsessed with money, but the fact of the matter is we all need to be a little obsessed with money throughout our lives.
Money management is something which definitely should be taught more at school when we are growing up and more open to learning, but it is something we have to find out for ourselves as we delve into the world. Correct money management and understanding the different financial institutions available to us is key. It helps us decide who to trust with our hard-earned money and allows us to build for the future from an early age. Hopefully, the financial institutions you use will educate you along the way best in terms of the best ways to manage your cash and be responsible.
Back in the day there were a handful of banks that people used to securely hold their money, but as things have developed around the world and technology has advanced, the amount of options available to us with regards to storing or generating money has increased hugely.
It’s important we all understand the difference between what a bank is and the other financial institutions are, so we can make the right decisions based on our own preferences, requirements, and personal situations.
Credit Cards
This won’t be a new term to you but it is definitely worth mentioning as it’s one of the most common alternatives to banks that people use to leverage money. You can apply with an array of different companies and actually, a lot of the main banks offer their own credit cards. As they are a short-term lending option, credit cards come with higher interest rates than most banks or traditional ways of holding or borrowing money.
There is a reason that credit cards are so popular these days and uses among the masses. They provide a backup for millions of people who might be on smaller salaries or can’t get through the month on what they earn, but can also act as a way to build up rewards and gifts for others.
If you are new to credit cards or unfamiliar with how they work, the wide range of benefits include:
- Instant access to funds from a lender and your own credit card which can be used for online purchases and in shops or other areas you might need to spend money like restaurants or bars
- Suitable repayment plans based on your own earnings and a support team there to help you if you find yourself in a position that you can’t pay it back
- Loyalty schemes and the opportunity to build up rewards if you use your credit card on a consistent basis. Depending on the supplier you use, building up points by using your credit card can mean being able to claim back financial points at different outlets like food, retail, and travel which is super appealing to users who spend on their credit card regularly
Credit cards are here to stay but need to be used carefully and if you think you have an issue with the amount of debt being racked up on your account then speak to your credit card supplier and try to work out a more ideal repayment plan.
Credit Unions
As opposed to banks and other large financial institutions, credit unions are typically owned by their members and don’t exist to serve the shareholders for profit. Its members’ purpose is to be helping credit unions as this gives the whole organization, its members, and also their partners much wider flexibility in terms of options and the way they operate with borrowing and lending money.
Operating in this differing way means they can:
- Offer better savings rates
- Provide lower loan rates
- Give their members overall lower fees on transactions
If you want to buy into a smaller, potentially fairer system then researching and looking into a credit union might be a good move for you personally.
Personal Loan Options
Some smaller, less-well-known institutions exist to provide people with personal, short-term loans to help in their personal lives. These often come with much higher interest rates than your typical bank or credit card supplier but this means they are able to offer much higher loans than other institutions. This is attractive for people who might need to borrow large amounts for shorter periods of time.
Business Loan Options
Most businesses need money to start, whether that be to employ salespeople, invest in products, or maybe infrastructure. The good thing about securing a business loan is that often it doesn’t go against your personal name, but against the company. This isn’t always the case but can definitely help when you are just starting out, giving you some confidence as a new business owner that if everything goes under then you are not personally liable.
Securing a business loan when starting a new company could:
- Help you invest in your first order of stock, allowing you to get your business off the ground and start generating revenue
- Allow you to secure a trademark or patent which gives your business some initial value in the market and an edge against your competitor
- Secure you and your new business a big first deal that gives it the momentum it needs and referrals from happy clients
- Provide you with the kickstart you need to follow your dreams and chase the vision in your head that you know you are able to execute
There are many different financial institutions that serve as alternatives to banks and each one plays a different role in supporting the various groups of people or professionals within our society. Real money management and understanding come from knowing what the options are out there before making any rash decisions. Do your research, understand what’s what and see what you think.
