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Banking is primarily the business of dealing in money and instruments of credit. Banks were traditionally differentiated from other financial institutions by their principal functions of accepting deposits—subject to withdrawal or transfer by cheque—and of making loans.

Banking used to be an 8.00a.m. to 12.30pm, Monday to Friday service that could only be conducted as one’s home

branch. Times have changed now. We can now banking24/7 from almost any location imaginable using wide range of access options, from in a person at a branch to online banking and internet bank while in another country and using cell-phone at the dock of the cottage.

How Bank Works

The funny thing about how a bank works is that it functions because of our trust. We give a bank our money to keep it safe for us, and then the bank turns around and gives it to someone else in order to make money for itself. Banks can legally extend considerably more credit than they have cash. Still, most of us have total trust in the banking services to protect our money and give it to us when we ask for it.

Loans, Checks and Savings:

Aside from checking accounts, they offer loans, certificates of deposits and money market accounts, not to mention traditional savings accounts. Some also allow you to set up individual retirement accounts (IRAs) and other retirement or education savings accounts. There are, of course, other types of accounts being offered at banks across the country, but these are the most common ones.

• Savings accounts - The most common type of account, and probably the first account you ever had, is a savings account. These accounts usually require either a low minimum balance or have no minimum balance requirement, and allow you to keep your money in a safe place while it earns a small amount of interest each month. In standard practice, there are no restrictions on when you can withdraw your money.

• Money market accounts - A money market account (MMA) is an interest-earning savings account with limited transaction privileges. You are usually limited to six transfers or withdrawals per month, with no more than three transactions as cheque written against the account. The interest rate paid on a money market account is usually higher than that of a regular passbook savings rate. Money market accounts also have a minimum balance requirement.

• Certificates of deposit - These are accounts that allow you to put in a specific amount of money for a specific period of time. In exchange for a higher interest rate, you have to agree not to withdraw the money for the duration of the fixed time period. The interest rate changes based on the length of time you decide to leave the money in the account. You can't write cheques on certificates of deposit. This arrangement not only gives the bank money they can use for other purposes, but it also lets them know exactly how long they can use that money.

• Individual retirement accounts and education savings accounts - These types of accounts require that you keep your money in the bank until you reach a certain age or your child enters college. There can be penalties with these types of accounts, however, if you use the money for something other than education, or if you withdraw the money prior to retirement age.

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