There are many different types of financial institutions that offer the various cash management alternatives that we have just discussed. The distinction between which services are offered by traditional banks and which services are reserved for non-bank financial institutions is blurring.

There are two major types of financial institutions: banks (i.e., deposit-type financial institutions) and nonbanks (i.e., non-deposit-type financial institutions). The choice of which institution you use depends on which institution will serve your needs the best and help you achieve your goals the fastest.

Deposit-type financial institutions mainly fall under four classifications: commercial banks, savings and loan associations, credit unions, and the newer Internet banks.

Commercial banks generally compete by offering the widest variety of services; however, they generally do not offer the highest interest rates on deposits or the lowest interest rates on loans.

Savings and loan associations have slightly different ownership arrangements than banks, but they are similar to commercial banks. Savings and loan associations may offer slightly higher rates than commercial banks on deposits and somewhat lower rates than commercial banks on loans.

Credit unions are similar to savings and loan associations, but they are not-for-profit organizations and are owned by their members. They can sometimes offer higher rates on savings accounts and lower rates on loans because they are not driven to provide a profit to shareholders.

Internet banks are electronic banks that do not have traditional brick-and-mortar branches. Because they have fewer branches, employees, and capital expenditures than traditional banks, they can generally pay higher interest rates on deposits and charge less for loans than traditional banks do.

Nonbank financial institutions consist of two main kinds: mutual fund companies and brokerage firms.

Mutual fund companies have broken into the banking arena. With many mutual fund companies, you can now write checks against your mutual fund account. Brokerage firms have also gotten into the act. Many brokerage firms now allow you to write checks, issue credit cards and ATM cards, and make loans. Brokerage firms offer these and many other account features that were once reserved for traditional banks.

Both banks and nonbanks offer online financial services; these services allow you to access bank balances and other resources twenty-four hours a day. With the blurring of roles between deposit and nondeposit institutions, banks can now offer investment services and non-banks can offer check-writing privileges, credit cards, and savings accounts.

Choosing a financial institution is a challenge. The key is to consider what you want to accomplish—your goals—and then to consider what the financial institution can provide. So, what do you look for in a financial institution? Your choices should ultimately and most importantly reflect your understanding of yourself and your investment needs. Consider these questions:

• Are you looking for low costs, low fees, and high returns on deposits?
• What services are important to you?
• Do you need loans, mortgages, or working capital for a small business?
• How important is safety for your deposits?
• Do you require government insurance? If so, know that this factor limits the types of institutions you can choose.
• What services does the financial institution provide? If all you require is a high return on your cash management assets, then your choices are much broader.

The main goal of cash management is to give you sufficient liquidity to help you achieve your financial goals. Only you can determine which goals are most important to accomplish now. Please note that it is not required that you use only one financial institution to help you achieve your goals. You can use more than one financial institution to take advantage of each institution's strengths.