What Is a Bank?
A bank is a financial institution that is licensed to accept checking and savings deposits and make loans. Banks also provide related services such as individual retirement accounts (IRAs), certificates of deposit (CDs), currency exchange, and safe deposit boxes.
There are several types of banks including retail banks, commercial or corporate banks, and investment banks.
In the U.S., banks are regulated by the national government and by the individual states.
Banks also give loans(kredit sifarişi) for useful purposes
Understanding Banks
Banks have existed since at least the 14th century. They provide a safe place for consumers and business owners to stow their cash and a source of loans for personal purchases and business ventures. In turn, the banks use the cash that is deposited to make loans and collect interest on them.
The basic business plan hasn't changed much since the Medici family started dabbling in banking during the Renaissance, but the range of products that banks offer has grown.
Basic Bank Services
Banks offer various ways to stash your cash and various ways to borrow money.
Checking Accounts
Checking accounts are deposits used by consumers and businesses to pay their bills and make cash withdrawals. They pay little or no interest and typically come with monthly fees, usage fees, or both.
Today's consumers generally have their paychecks and any other regular payments automatically deposited in one of these accounts.
Savings accounts pay interest to the depositor. Depending on how long account holders hope to keep their money in the bank, they can open a regular savings account that pays a little interest or a certificate of deposit (CD) that pays a little more interest. The CDs can earn interest for as little as a few months or as long as five years or more.
It is important to note that the money in checking accounts, savings accounts, and CDs is insured up to a maximum of $250,000 by the federal government through the Federal Deposit Insurance Corp. (FDIC).1
Loan Services
Banks make loans to consumers and businesses. The cash that is deposited by their customers is lent out to other customers at a higher rate of interest than the depositor is paid.
Brick-and-Mortar and Online Banks
Banks range in size from small, community-based institutions to global commercial banks.
According to the FDIC, there were just over 4,200 FDIC-insured commercial banks in the United States as of 2021.2 This number includes national banks, state-chartered banks, commercial banks, and other financial institutions.
Traditional banks now offer both branch locations and online services. Online-only banks began emerging in early 2010s.
Consumers choose a bank based on its interest rates, the fees it charges, and the convenience of its locations, among other factors.
Types of Banks
Most banks can be categorized as retail, commercial or corporate, or investment banks. The big global banks often operate separate arms for each of these categories.
Retail Banks
Retail banks offer their services to the general public and usually have branch offices as well as main offices for the convenience of their customers.
They provide a range of services such as checking and savings accounts, loan and mortgage services, financing for automobiles, and short-term loans such as overdraft protection. Many also offer credit cards.
Commercial or Corporate Banks
Commercial or corporate banks tailor their services to business clients, from small business owners to large, corporate entities. Along with day-to-day business banking, these banks also offer credit services, commercial real estate services, employer services, and trade finance,
JPMorgan Chase and Bank of America are examples of commercial banks, though both have large retail banking divisions as well.
Investment Banks
Investment banks focus on providing corporate clients with complex services and financial transactions such as underwriting and assisting with activity. They are primarily financial intermediaries in these transactions.
Their clients include large corporations, other financial institutions, pension funds, governments, and hedge funds. Morgan Stanley and Goldman Sachs are among the biggest U.S. investment banks.
How Do I Know My Money Is Safe in a Bank?
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the U.S. financial system. The FDIC supervises and examines banks to ensure that the money they handle is safe.
Moreover, it insures your money. The insurance maximum is $250,000 per depositor, per insured bank, for each account ownership category.
You don't have to purchase this insurance. If you open a deposit in an FDIC-insured bank, you are automatically covered.
