Bank
Banks play in important role in the economy. It's important t know the function and services offered by these financial institutions.
BANK – an institution for receiving, lending, exchanging, and safeguarding money and, in some cases, issuing notes and transacting other financial business.
Definition provided by Dictionary.com
How To Use
Banks provide different vehicles to receive, lend, exchange, and safeguard money. Primarily these transaction are made through the use of different accounts and services. Setting up a bank account allows you to have seamless business transactions and purchases without the use of physical cash. They also provide an avenue to transfer money directly to people you know electronically.
Services
In addition, having a bank account grants access to various services the bank supplies. Loans, Mortgages (Home Loans), Credit Cards, and occasionally Financial Planning become available as you develop your accounts with the institutions. Loans allow consumers or businesses to finance purchase without the use of their own money. The banks would however expect the money to be paid back with added interest. Ideally, these purchases would create more value or cash flow for the person taking it out so they could not only pay off the loan but see long term benefits as well. Mortgages or home loans work the same way.
Credit cards or credit lines can be opened as well. This tool functions like a debit card to make transactions, however, the bank loans the money provided and charge interest on the amount used. The difference being, loans use large amounts of capital to be paid off by a specific time and credit cards provide smaller loans on a recurring basis.
Financial planning varies from institution to institution with some even offering hands on consultation. Banks like USAA and Bank Of America offer videos and online literature to help inform their clients.
Interest & Fees
It is important to understand the interest rates of your particular bank because it will impact your savings, loan payments, and credit cards payments. Higher interest rates on a savings account will benefit you in the long run, but a higher interest rate can bleed you dry if not taken into account! Moreover you’ll want to talk with a representative about any initiation fees the banks apply to services.
This article defines the workings of a traditional commercial bank, but there are other types to consider
Banks Types
Central – federal lenders that provide capital to commercial establishments
Investment – lenders that broker deals for investors
Private – Uses private capital of a group or individual
Learn more with our ABC's Of Finance
