Banking basics refer to the principles and concepts relating to the practice of banking. Banking deals with storage for cash, credit facilities, investments, and other financial transactions. The banking industry is very important to economies since it channels funds to borrowers with productive investments. Let’s learn more about banking basics.
Banking Fundamentals – Types of Bank Accounts
The common types of bank accounts include:
Savings Account
A savings account is an account in which a customer can deposit money that they don’t need right away. This money can be withdrawn whenever needed. Banks loan out the money to borrowers and charge interest on the amount of credit disbursed.
Checking Account
A checking account allows a customer to access their deposited funds. They can use those funds to make transactions such as paying bills. A customer can access his/her funds by writing a check, using a debit card, or by setting up automatic transfers to another account.
Certificate of Deposit
A certificate of deposit is an account that holds a fixed amount of money for a definite period of time. A fixed interest rate is paid on the amount held.
Banking Fundamentals – Types of Banks
Here are the most common types of banks in the United States of America:
Commercial Banks
In the US, commercial banks are the most common.They provide many services such as accepting deposits, providing business loans and offering basic investment products to individuals and private businesses.
Credit Unions
A credit union is a bank that is open to a specific group of people who are eligible for membership. It’s member-owned and operated by the members. Most of the time, credit unions serve members of a church, residents of a local community, or employees of a certain company or school.
Investment Banks
Investment banks provide corporate clients access to the capital markets in order to raise funds for expansion. They can help companies raise funds in the stock market and bond market.
