Banks are financial institutions that offer their customers a variety of different services. Unless you keep your money in the form of cash under your mattress or in a safe, or you choose to use a credit union, you probably use a bank to store and borrow money. These financial institutions offer their customers an easy way to store, spend and borrow money when they need it most. The following is a very basic, brief explanation of the three most common services that are offered by banks. |
Checking Accounts Having a checking account is quite important to most people. Virtually all of your money will be stored and filtered through your checking account, so it is essential that you have one you can count on. With a checking account, you have easy access to your money in the form of debit cards, checks, and online payments. Checking accounts allow you to safely store your money and get it when you need it. You can deposit money by going to a physical location and dropping off cash or checks, and you can have your paycheck directly deposited into your account. Virtually all banks offer checking accounts.
Savings Accounts Savings accounts are very similar to checking accounts. They allow customers to store their money safely, while earning a small amount of interest. Savings accounts typically contain money that you will not regularly need immediate access to. The interest paid is a bit higher than what is typically paid on a checking account. You still have easy access to your account, although the process is not as easy as writing a check or making a payment with a debit card, which you can do with ease with most checking accounts. These accounts are quite safe. Essentially, if you want to put money aside, the savings account is the safest way to go, especially considering your other opportunity is keeping your money on you or in your home.
Loans Another common service offered by these financial intuitions is a loan. Making major purchases such as a car, home, or a business involves a large sum of money, and most people don't have these funds on hand in cash. The primary function of banks is to take its customers' deposits, pool that money, and lend the money out to customers in the form of a loan. They make money from these loans through charging borrowers interest. This works because although many customers who have deposited money may need their funds back at any given moment, most will not. This allows banks to give out long-term loans from short-term deposits.
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