We have long outgrown the savings that we would do in our piggy banks. Today is the age of modern consumer banking where banks work for the betterment of any form of transaction and give us the pleasure of banking with one click. Many times in the hustle bustle of life we forget to understand the banking basics and therefore do not effectively utilize the various services that banking has to offer.
In this article, I’d like to give the Essentials of Banking that you need to know.
Banks are huge financial institutions that earn money by providing services to paying customers. This includes loans for mortgage, business, auto or personal requirements, bank accounts of various types, services like safe deposit boxes, lockers, and deposits. Banks collect the funds deposited with it by people and use that money to offer loans. You earn some share of the profit that the bank earns on some savings account. Most banks are regulated by a government-held body like the RBI. Without a bank, you might keep all of your money in the form of cash or real property, but it will be subject to theft, disaster, or other losses.
A bank account is the fastest way to access your money. Most banks provide traditional banking products and services to their customers. Depending on their requirement customers can open bank accounts. These are the types of accounts:
- Savings account – This account keeps your money safe and also earns you a small amount of interest. You can withdraw from the account whenever you need.
- Checking account – This type of account lets you transfer funds to others by writing cheques or using a debit card linked to the account. These accounts typically carry a small monthly fee.
- Money market account – This account requires a minimum balance to stay open and earns a higher rate of interest than other accounts. The money is however less accessible.
- Deposits – This type of account requires you to deposit your money for a set duration of time and it can’t be touched.
The essentials of banking also involve choosing a bank that is best for you. One must keep in mind the following while choosing a bank.
- Safety of the bank is a priority. The bank should be insured and should have a well laid out set of regulations.
- Expenses are another thing to keep in mind. Competitive interest rates, ATM fees, and other hidden charges should be manageable and not exorbitant.
- Convenience to access the bank is a must. It should be close by with accessible business hours.
These are some of the banking basics that will help you get started with the banking system.