Glossary
Bank
A bank is a financial institution that accepts deposits and grants loans. A bank may participate in other financial endeavors and the activities that banks participate in are broadening.
Banks may offer a range of services including:
- Checking Accounts
- Savings Accounts
- Certificates of Deposit
- Savings Bonds
- Money Orders
- Traveler's Checks
- Currency Exchange
- Personal Loans
- Auto Loans
- Commercial Loans
- Construction Loans
- Mortgages
- Credit Cards
- Insurance
- Investment Services
- Check Cashing
Banks are used as a safety device to store money. Most deposit accounts are secured by the FDIC for up to $100,000. That means if the bank goes out of business the federal government guarantees that customers will get their money, up to $100,000.
Banks then use these deposits to make loans to other customers, individuals and businesses. The bank makes money on the different between the rate it pays on savings versus the rate it charges for loans. This system is not exactly straight forward as banks can borrow money from other banks to make loans. Banks can also sell existing loans to groups of investors.
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[...] I was listening to the radio the other day on my way home from work and heard an advertisement for a bank, then a few seconds later I heard and advertisement for a local credit union. Then I drove by a bank and then I passed a credit union. I had been mulling over switching some of my accounts from my current back to a locally owned credit union. I decided I should read up on the difference between the two as it had been awhile since my Money and Banking class back in school. You are the lucky beneficiary of my research. [...]