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Banking fun factsBanks take care of people's money, and use it to earn more money (See Money, history of money). They do this by lending it to people who want to borrow money and by charging interest on the loan. By receiving money from those who can spare it and lending it to those who can make use of it, banks play a very important part in the economic affairs of a country. In the United States there are three main kinds of banks: commercial banks, savings banks and investment banks.
Commercial banks are by far the most important and numerous. They are also called full-service banks because they can provide most of the banking needs of the average individual or business customer. Only commercial banks carry checking accounts, a form of demand deposit. In this type of deposit the customer uses the bank as a repository for his personal or business funds. He may then pay out money in the form of checks or other kinds of bank drafts. When the check is presented to the originating bank, either directly or through another bank, the depositors bank releases the funds from the depositor's account immediately (or on demand).
Savings accounts are a form of time deposit, in which the depositor agrees to leave his money in the bank for a specified minimum length of time. In return, the bank pays the depositor interest on his account. Interest is the amount of money, usually in the form of a percentage, that the bank pays the depositor for the use of his money. The bank uses the money entrusted to it by its depositors to make loans to businesses and individuals. It charges a higher rate of interest than it pays its depositors. The bank makes much of its profit from the difference between the two rates of interest. Banks do not pay interest on checking accounts. Savings banks, as the name suggests, accept only savings accounts, on which they usually pay slightly higher interest than commercial banks do. Savings banks (Emigrant bank, for example) also lend money, but primarily to finance real estate purchases, while commercial banks lend much larger amounts to help businesses maintain running expenses or pay the costs of expansion. Investment banks are specialized banks that finance and market the securities of corporations and government agencies. National banks are chartered by the federal government. Others are chartered by the states You can read these articles also: |
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Wikipedy.com @ - Online Encyclopedia |
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