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Banking Terms -> account

Bank accounts represent financial accounts in banks in which financial institutions hold money for account holders, resulting in a debt balance or positive balance. Alternatively, banks loan money to customers, and this leads to a credit or negative balance. Bank accounts are used to deposit savings, unlike brokerage accounts which are used to sell and buy securities. Savings and checking accounts are two main types of bank accounts. Broadly speaking, a bank account refers to a monetary account, designed to process multiple transactions. Bank accounts make it possible to deposit money, thereby earning monetary returns. Some accounts come with debit and credit facilities and cannot fit neatly in a polarized definition. They have different names depending on the country where you open an account. For example, checking accounts in Canada and the United States correspond to current accounts in the United Kingdom. There are different types of bank accounts, and some may work better for you than others. If you choose a checking account, you can loan or give money, pay bills, and make purchases. Checks can be used for money transfers as well. You can transfer money from your account to a bank account held at a different bank. Typically, you will be allowed to make as many withdrawals and deposits as you need to. Many bank clients also choose to deposit and withdraw money through automatic teller machines. A savings account is another type of account that pays interest. Account holders cannot write checks or otherwise use the money directly. With this account, holders deposit some of their liquid assets and earn monetary returns in exchange for that. Money cannot be called in immediately, and you cannot free up cash without incurring a penalty fee. Banks typically limit the number of financial transactions (deposits and withdrawals) that can be made every month. At the same time, holders of savings accounts may be allowed to withdraw money and make deposits through ATMs. Passbooks are provided with savings accounts, helping account holders keep track of the transactions they make. Another type of bank account offered by some institutions is the no-frills bank account. It is a basic account that allows bank clients to cash checks and pay bills without having to pay high fees for these transactions. If you choose such an account, you may be allowed to make only a limited number of withdrawals and deposits. The number of checks to be processed will also be limited within a given month. No-frills bank accounts typically dont go with interest. A money market account is still another deposit account offered by banking institutions. They invest in various corporate and government securities, thus paying interest to depositors. Interest paid is determined by the current interest rates set on the money markets. Money market accounts differ from other bank accounts in that they offer a higher interest rate and thus, a higher minimum balance is required. In this way, bank clients avoid paying monthly fees and earn interest. Finally, certificates of deposit are yet another type of bank account in which bank clients deposit certain amount of money for a specified period of time. You cannot withdraw the money from the account before the maturity date. Some banking institutions allow this, but you will be charged a penalty fee. The interest banks pay on certificates of deposit is normally higher, compared to other types of accounts. However, the interest is based on the period of maturity, meaning that the longer it is, the more the account will earn.

Banking Terms -> ATM

An automated teller machine or ATM is a computerized device which serves bank clients by providing access to financial transactions (e.g. money withdrawals). This is done without a bank teller, clerk, or cashier. With ATMs, clients access their bank accounts and can check their account balance, make cash advance or cash withdrawal, or buy prepaid phone credit. An additional benefit is that you can withdraw money in another currency, which is converted at the daily exchange rate. In fact, automated teller machines offer the best possible rate in many cases. Two main types of ATMs are available. The more basic unit allows clients to withdraw cash from their accounts and obtain reports of their account balances. The more complex type gives access to account information, enables credit card payments, accepts deposits, and more. In order to use these features, you have to be a client of the financial institution which owns the machine. Automated teller machines are found around cities and towns, at gas stations, and in other locations. These are travel centers, malls, convenience stores, supermarkets, airports, etc. They give bank clients easy and convenient access to their accounts. Any persons with a credit or debit card can withdraw money, make a deposit, or use another feature offered by ATMs. You are normally not charged if you use an ATM, owned by your financial institution. However, you may have to pay a fee if you access cash through a machine operated by a competing bank. The prototype of todays ATMs was presented by Luther Simjian who patented it in 1939. Some experts, however, claim that the Scotsman James Goodfellow was the first to patent an automated teller machine in 1966. An ATM was installed by John Shepherd-Barron at Barclays in London in 1967. It was only in the mid 80s when automated teller machines became part of mainstream banking in various parts of the world. How can you use an ATM? You insert your debit or credit card into the ATMs card reader and respond to several prompts on the screen. If you entered your PIN correctly, you will get cash and a receipt. An alternative to your ATM card is the check card. You can use it to make purchases at bookstores, grocery stores, ticket counters, discount superstores, and pharmacies. Other places are restaurants, e-tailers, and hotels. If you prefer to use an ATM, you may wonder how it works. The unit is equipped with an electronic eye, which serves to count bills exiting through the dispenser. All the information pertaining to a particular financial transaction (including the bill count) is recorded in a journal. Machine owners print out this information periodically and keep it for 2 years. If a card holder disputes certain transaction, they can request a printout which shows the transaction. The next step is to get in touch with the host processor. If a printout cannot be provided on a short notice, the client has to notify the financial institution, which issued the card. A form is filled out to be faxed to the host processor who is responsible for resolving the dispute. Apart from the electronic eye, the cash-dispensing mechanism is equipped with a sensor which checks bills thickness. If two or more bills get stuck together, they will not be dispensed but will go to a reject bin. This also happens if some bill is folded, torn, or warn. The ATM records the number of bills diverted to the reject bin so that the owner of the machine is informed of the quality of bills in the unit. If the reject rate is high, this may indicate a problem with the dispenser or the bills.

Banking Terms -> bank

Banks are financial institutions that play the role of financial intermediaries, channeling funds between deficit and surplus sources. An example of an intermediary is a banking institution which turns deposits into loans. Financial intermediation is a function of banks through which certain liabilities and assets are transformed into different kinds of liabilities and assets. In this way, banking institutions channel funding from savers, who have deposited extra money, to borrowers who need additional financing for certain objectives and planned activities. Banking institutions can be subdivided into several types of financial entities according to their focus and activities. The three main types are central bank, savings bank, and commercial bank. Central banks function to circulate money on behalf of their respective governments. They regulate the money supply by acting as a monetary authority which implements the countrys monetary policy. In the United States, the Federal Reserve System acts as the central banking system. Its responsibilities include regulating and supervising banks in the country, implementing the national monetary policy, and maintaining a stable financial system. Another duty is providing financial services to the government, official institutions of foreign counties, as well as depository institutions such as credit unions, savings and loan associations, commercial banks, and savings banks. Basically, these are financial institutions which can legally accept deposits from their clients. Mortgage banks are a type of a non-depository institution. Such entities are not allowed to accept deposits by law but are licensed to extend financing. Savings banks are another type of bank, which can be mutually or stockholder-owned. The main purpose of savings banks is to accept deposits, but they may have other functions as well. Some saving banks specialize in retail banking, including credit and insurances, savings products, and payments. They mainly service medium-sized and small enterprises and individual clients. Unlike commercial banks, savings banks provide regional and local outreach because of their decentralized distribution networks. Generally, savings banks are financial institutions which accept deposits and pay dividends or interest to savers. They channel the deposits of savers to borrowers who require financing. Savings deposit departments specialize in this at the trustee savings banks, credit unions, mutual savings banks, and savings and loan associations. It is important to note that savings banks do not handle demand deposits. Commercial banks are a third type of bank which accepts deposits and transforms them into credit. The latter can be invested indirectly on the capital markets or provided in the form of loans. When it comes to the global financial markets, commercial banks serve as the link between capital surpluses and capital deficits. In general, commercial banks are financial institutions that offer a number of deposit accounts, including savings, checking, and time deposit. While these institutions are owned and run by groups of investors, some of them are members of the Federal Reserve. In addition, these institutions offer various services to individuals, but their main purpose is to accept deposits and provide loans to businesses. In addition, commercial banks provide money market, transactional, and other accounts. There are many banking institutions in the United States to choose from, depending on your requirements and location. Among them are the U.S. Bank, Wachovia Bank, Bank United, Bank of America, Capital One Bank, and many others. Credit unions are an alternative to banking establishments. They are member-owned cooperatives, which feature the same financial services and products as banks do. US credit unions have close to 90 million members. You can choose from credit unions such as DFCU Owners United, Save First Basin Credit Union, Save Columbia Credit Union, and others.

bank note
Banking Terms -> bank note

Bank notes are promissory notes paid to bearers on demand. They are made by banks and represent fiat money or money with value, which is created under government law or regulation. Originally, coins were produced from semi-precious and precious metals and served to settle trades. Bank notes are an alternative to coins and their use involves some advantages and disadvantages. For example, the wear costs of bank notes are low they can be used as a payment instrument even if in poor condition. Banks still have to replace banknotes and they wear out quicker than coins. In addition, bank notes are printed on polymer or paper, and their cost is lower than coins, which are produced from semiprecious metals. Finally, it costs less to transport bank notes, compared to coins, because they are lighter. Millions of financial transactions around the globe involve bank notes. They are regarded as legal tender and are money or currency. The US Federal Reserve regulates how much currency is created and distributed in the country by the Bureau of Printing and Engraving. The Federal Reserve issues bank notes, and they carry emblems to indicate that. Bank notes have clearly printed values as well as security features to minimize the risk of forging. The central banks of other nations also issue bank notes. Some people are interested in historic examples of bank notes and collect them. This branch of numismatics studies currency, money, and financial systems in general. Sometimes, bank notes do not function as money and legal currency, but they have numismatic value. Confederate bank notes were printed during the American Civil War, for instance. They are not in circulation, but are an object of interest and have monetary value. Similar to paper money, some people also have collections of antique coins. Different materials have been used to issue bank notes over the years, including paper, leather, and silk. Silk provides additional security and durability and is used in the manufacturing of different bank notes. Leather notes had been issued in times of emergency such as sieges. For example, they were produced from sealskin under the Russian administration of Alaska. France and French Canada used playing cards as money in the 19th and 17th 18th century respectively. Germany, after the First World War, and the Isle of Man also used playing cards as currency. Canada printed bank notes on wood in the period 1763 1764 while checkerboard pieces served as currency in Bohemia in 1848. Bank notes are also called bills and notes. Depending on the region or country of origin, bank notes differ, but all have a monetary value. One issue with bank notes is that they are easier to forge. If you are given a note and suspect it is a counterfeit, you should bring it to the police. The note will be sent for analysis. Bear in mind that a counterfeit bank note is worthless, and you should not pass or hold it. This is a criminal offence. The lifetime of bank notes is limited, and states collect them for destruction, typically through shredding or recycling. Financial institutions such as banks remove bank notes from the money supply after some time because of wear and tear. Human inspectors check whether notes are torn, mutilated, and unfit for further use. Alternatively, sorting machines can be used to determine whether bank notes need to be removed and shredded. Counterfeit notes are also destroyed unless forensic or evidentiary purposes require a counterfeit to be held. Contaminated banknotes are also removed from circulation in order to prevent the spread of infections and diseases.

Banking Terms -> bonds

Bonds are debt securities issued by an authorized issuer that owes debt to holders and pays interest for the use of the principal. A bond represents a contract to pay off the money borrowed and in that, it is a debt investment. Investors loan money to government or corporate entities which borrow the funds for a specified period and at fixed interest. The US government, states, municipalities, and various companies use bonds to finance different activities and projects. Bonds are a fixed-income security and one of the major asset classes, together with cash equivalents and stocks. There are various types of bonds, including notes and bills, municipal bonds, corporate bonds, and U.S. Treasury bonds. In general, bonds are defined by two features, duration and credit quality, which determine the interest rate of bonds. Bond maturities vary widely from 30-year government bonds to 90-day Treasury bills. Like stocks, bonds are securities, but there is one important difference between the two. Stockholders are the owners of a company and have equity in it while bond holders are lenders, with creditor stake in a company, establishment, or another entity. In addition, bonds have maturity or a specified term after which they are redeemed. Stocks, on the other hand, can be outstanding for an indefinite period of time. Basically, bonds are similar to loans and help borrowers make long-term investments. Government bonds are used to finance current expenditure. It is important to note that commercial paper (fixed-maturity unsecured promissory note) and certificates of deposit are not bonds but money market instruments. Treasury bonds are debt securities that pay fixed interest until maturity. Interest is paid every 6 months, and bonds are issued with up to a 30-year term. Treasury bonds or TBonds are a US government debt security instrument with income being taxed at the federal level only. The minimum denomination of treasury bonds is $1,000. They are first sold through action and then can be traded on the secondary market. Corporate bonds are a type of bonds issued by corporate entities. Corporate bonds are issued to raise capital and expand business corporations. They are normally long-term debt securities, with a term of one or more years after the date of issue. Commercial paper is another term used for debt instruments with a shorter term. In general, corporate bonds are sold to investors and backed by the companys payment ability. This is usually money expected to be earned from future projects and operations of the company. The physical assets of corporations are sometimes used as collateral. Note that corporate bonds carry higher risk compared to government bonds. They go with a higher interest rate for this reason. This type of debt financing is a main capital source for many business entities, together with lines of credit and bank and equity loans. Companies that can show a consistent potential for earning offer debt securities at an attractive coupon rate. Municipal bonds are another variety of bonds issued by local government structures. They are issued by local government entities and their respective agencies. Among the issuers of municipal bonds are counties, cities, school districts, special-purpose districts, publicly owned airports, redevelopment agencies, and others. Municipal bonds are secured by issuers by specified revenues. The interest income that holders receive in the US is oftentimes exempt from income tax and federal income tax, but not all bonds are exempt, depending on their purpose. Price restrictions apply to new issue stocks, but once they are bought by investors, bonds can be traded any time. The same bonds may be re-traded several times a week by professional investors.

Commercial bank

A commercial bank, also called a business bank, is a financial intermediary which provides money market, checking, and savings accounts and accepts time deposits from customers. These banks are under the authority of national central banks. At present, there are over 6,500 FDIC-insured commercial banks in the United States, down from over 12,000 in 1990. They operated through some 89,170 offices and 82,641 branches in 2010. Commercial banks offer business loans, instalment loans, and other loan types, issue bank checks and bank drafts, and process payments through internet banking, EFTPOS, telegraphic transfer, or other means. In addition, commercial banks provide standby and documentary letter of credit, cash management and private equity financing. A traditional role of commercial banks has been to underwrite securities, but todays big commercial banks have their own investment bank arms which are involved in this. Commercial banks also provide guarantees and offer performance bonds, along with safekeeping of documents. Finally, unit trusts, insurance, and brokerage are also offered by commercial banks. Commercial banks also work as retail banks and serve businesses as well as individual clients. Business entities have different needs and requirements than consumers. Some companies require that the bank accommodates a considerable volume of cash deposits and credit card payments. In general, commercial banks serve the needs of small and large businesses by providing a variety of services. These include savings and checking accounts, loans for capital and real purchases, letters of credit, and lines of credit. Other services offered to businesses are foreign exchange, lockbox services, and transaction and payment processing. Commercial banks accept deposits to corporate and personal accounts and then use the money to extend financing to businesses and individuals. This is the opposite of what investment banks do they specialize in generating revenue through investment activities. Commercial banks extend various loans to their clients. To their individual customers, commercial banks give out loans for the purchase of homes, vehicles, and other personal property. Commercial banks also extend loans for debt consolidation and home improvements. Business entities obtain business loans for the purpose of purchasing operating supplies or financing a payroll. On the other hand, if a business aims at corporate restructuring or realignment, such business loans are more likely to be financed by an investment bank. Commercial banks offer three main types of loans unsecured loans, secured loans, and mortgages. Unsecured loans may be available under various marketing packages, including personal loans, credit card debt, bank overdrafts, and other loans. Unsecured loans are not guaranteed with collateral unlike the secured variety. Mortgage loans are a popular debt instrument, which is used to buy real estate. Many commercial banks did not specialize in real estate loans in the past, securing their earnings mainly from consumer and commercial loans. With changes in banking policies and laws, these banks play a more active role in home financing. In addition to these financial products, commercial banks feature a variety of savings programs. They offer interest-bearing checking accounts, savings accounts, certificates of deposit, and other financial services. Finally, commercial banks have some ancillary functions as well. These include agency and general services. Some banks deal with payment and collection of checks and buy and sell stocks. They may also offer SMS banking, online banking, advisory services, and more. The distinction between investment and commercial banks is not always clear. The US banking sector functions with a clear division between both bank types. However, this is not the case everywhere around the world. Some big international banks offer investment and commercial banking services to their customers.

Banking Terms -> credit

Credit is a term which describes the trust of one party (person or financial institution), offering resources to another, whereby the money will not be reimbursed immediately to the creditor. This generates debt, which is to be paid at a later date. The offered resources may be services or goods as with consumer credit or they may be financial, for example, extending a loan. Any type of deferred payment can be described as loan. Creditors, also called lenders extend credit to borrowers (or debtors). Credit can be subdivided into two types consumer credit and trade credit. Consumer credit represents services, goods, and money offered to a customer in lieu of payment. Consumer credit can take many forms, including installment/ personal loans, store cards, credit cards, and retail loans. In addition, consumer credit includes mortgages and retail installment loans or retail loans. Consumer loans are extended to individuals, including mortgages, but some exclude residential mortgages from the broader definition of consumer credit. Trade credit differs from consumer credit as it refers to a delayed payment of purchased items. The term is used in commercial trade. It should be noted that not only people who experience financial difficulty are extended credit. Some companies often extend credit to clients as part of the conditions of the purchase agreement. Credit managers work for companies that offer credit to their clients. Basically, credit refers to borrowed money that can be used to purchase different things. You can also pay for services, such as phone and cable. For instance, if you have used cable services over certain period of time and pay for this at the end of the period, you have bought them on credit. Home loans and lines of credit also qualify as credit. Lines of credit allow consumers to have money at hand whenever they need it. Lines of credit often go with a low interest rate, and it is up to borrowers to use the money in increments or to use the entire credit limit. Lines of credit can be used for home repairs and renovations, as well as for other purposes. Once approved, bank clients do not have to apply for new loans every time they need money. Credit cards are also credit in that they are a constant credit line which should be paid on a regular basis. If you are paying off your card every month, you will not pay anything in interest. As with loans, you can choose from a variety of credit cards cash back credit cards, rewards credit cards, no annual fee credit cards, business credit cards, and many others. Mortgage holders pay different amounts per month. There are various types of mortgages, coming with different repayment terms and plans. Some mortgages are fixed rate, while others are variable rate. Mortgage types include repayment mortgages and interest only mortgages. With the former, mortgage holders make monthly payments over a specified period of time until they have repaid the loaned amount, plus the interest. Interest only mortgages allow one to pay the interest only over an agreed period of time. When looking for deals, it is a good idea to look at the interest rate. It can be standard variable rate, tracker, discounted rate, capped, or cap and collar, etc. In general, repayment is an important element when it comes to borrowing. A good credit rating tells creditors that you are creditworthy and honor your loan agreements. If you have a compromised credit, you will be considered a risky borrower by potential lenders. This means that you may be unable to obtain financing whenever you need it.

debt instrument
Banking Terms -> debt instrument

A debt instrument is financial instrument that allows participants and markets to transfer debt obligations between parties. The transferability of debt obligations improves liquidity and makes it possible for creditors to trade debt obligations in the markets. Debt instruments are used to facilitate the trading of debt and thus, it is possible to move debt obligations between parties efficiently and quickly. In general, debt obligations are electronic or paper obligations that allow issuing parties to raise funding. They promise that the obligation will be repaid to creditors in accord with the contracts terms and conditions. A main benefit of debt instruments is that they allow creditors to trade obligations in order to generate revenue. It is this transfer of debt ownership that keeps liquidity high. As a result, creditors make use of the funding they collect from different investors, making interest payments and then repaying the debt principal. There are various kinds of debt instruments, including leases, mortgages, bonds, notes, certificates, and other agreements between borrowers and lenders. Thus, municipal bonds, certificates of deposit, treasury bills, and commercial paper fall into the category of debt instruments. Bonds are debt securities, with issuers owing debt to holders and paying interest to use the principal. A bond represents a contract under which borrowed money should be repaid at fixed intervals. Apart from municipal bonds, there are various types, including bearer bonds, subordinated bonds, inflation linked bonds, serial bonds, lottery bonds, and many others. Commercial paper is another debt instrument with fixed maturity. With this unsecured promissory note, the maturity can be from 1 to 270 days. Corporations and large banking institutions issue commercial paper to obtain money, thus meeting their short-term obligations. Since it is unsecured, commercial paper is backed by the issuers promise to repay the full amount by the agreed term. Only entities with excellent credit standing from recognized rating agencies can issue this debt instrument, selling it at a reasonable price. T-bills or treasury bills have a maturity of up to 1 year. There are four subcategories of treasuries issued by the US Department of Treasury. These include treasury inflation protected securities, treasury notes, treasury bills, and treasury bonds. In general, treasuries represent debt instruments of the US federal government. Some treasuries are non-marketable securities, among which government account series, state and local government series, and savings bonds. Marketable securities are heavily traded and thus are quite liquid. Non-marketable securities, on the other hand, cannot be transferred by way of market trade and are issued by subscribers. Certificates of deposit are yet another type of debt instrument and are commonly offered by US banks to their clients. CDs represent a time deposit and share similarities with savings accounts. For example, they are risk-free because they are insured by either the National Credit Union Administration or the Federal Deposit Insurance Corporation. However, they also differ from savings accounts due to the fact that they typically come with a fixed interest rate and a fixed term. Certificates of deposit are designed to be held until maturity. Holders can withdraw their money at maturity, together with all interest accrued. Financial institutions normally offer a higher interest rate for keeping clients savings on deposit. While fixed interest rates are more common, some banks feature certificates of deposit with variable interest rates. In general, debt instruments stand for a written promise to pay back debt. They are also known as instruments of indebtedness. Debt instruments are also documented evidence, which is legally enforceable and promise the timely payment of debt obligations. Other debt instruments include bankers acceptance, promissory notes, debentures, and bills of exchange.

mutual funds
Banking Terms -> mutual funds

Mutual funds are collective investment mechanisms, which are professionally managed and attract investors who seek to buy money market instruments, bonds, stocks, and other types of securities. Mutual funds have to be registered with the US Securities and Exchange Commission and managed by a board of trustees or board of directors, depending on whether the fund is established as a trust or corporation. The board makes sure that the fund operates in the best interest of the investors and hires service providers and a fund manager for the fund. Mutual funds offer many advantages to investors, among which daily liquidity and diversification. These funds make it possible for investors to participate in investments that require considerable financing. In terms of diversification, mutual funds invest in a portfolio that contains a mixture of different securities. One fund may choose to combine stocks in the industrial and service sector as to reduce the negative impact of one type of security on the portfolio. In general, a diversified portfolio contains bonds, issued by different entities and with varying maturities, along with stocks from different sectors and with differing capitalizations. This can be very expensive for individual investors. Investors who participate in mutual funds benefit from asset allocation and diversification without having to invest considerable amounts of money in an individual portfolio. It may not be enough to participate in one mutual fund in terms of diversification. You may want to check whether the mutual fund is industry or sector specific. For instance, if you invest in industry specific fund, it may spread investors money over twenty or fifty companies. However, if prices in this sector drop, the funds portfolio is likely to be affected. In principle, mutual funds represent open-ended funds which are run by investment companies, raising money from investors or shareholders. They invest in groups of assets in compliance with the funds objectives, raising money through the sale of shares. Mutual funds sell shares similar to companies selling stocks to the public. This money is used to buy different investment instruments (e.g. bonds and stocks). Investors or shareholders invest in the fund and get an equity position in exchange for their money. With many mutual funds, investors can sell their shares whenever they want to. However, share prices fluctuate on a daily basis, depending on how well the funds securities perform. While investors benefit from professional management and diversification, many mutual funds require a minimum investment and charge fees. At the same time, mutual funds offer convenience, liquidity, and choice to investors. There is a large variety of mutual funds, among which balanced funds, global funds, clone funds, capital appreciation funds, and many others. An aggressive growth fund, for example, works to achieve the highest capital gains possible. Investing in such a fund is a good choice for investors who can take high risks in exchange for a potential high profit. Aggressive funds tend to produce bad results in times of economic downturn and good results with economic growth. A growth and income fund is another type of mutual fund which aims to offer income and growth by investing in businesses that have dividends and show earnings growth. International funds are such mutual funds that choose to invest in bonds of firms outside the United States. Finally, there are regional and sector funds as well. Regional funds will invest in one particular region of the world or in some country. Sector funds invest mostly or entirely in one sector and are hence less diversified. They are more volatile and riskier that the market, but the level of risk depends on the chosen sector.

retail banking
Banking Terms -> retail banking

Retail banking is a type of banking with which financial transactions are executed with clients instead of other banks and corporations. Products and services provided include credit and debit cards, transactional and savings accounts, personal loans, mortgages, and many others. Retail banking is designed as a one-stop location for a number of financial products and services. Some retail banks even offer various investment services, including brokerage accounts, wealth management, retirement planning, and more. Some banks also have commercial and merchant branches that cater to businesses. The most basic products offered by retail banks include transactional and savings accounts. However, retail banks aim to offer a large array of products to attract customers and maintain customer loyalty. This diversification offers more opportunities for financial institutions to profit. In addition to basic services, banking establishments offer retirement accounts, certificates of deposit, car and home loans, safe deposit boxes, and others. Banks offer some or all of these services depending on the financial and banking regulations. However, they often partner with other banks and financial entities to offer more services. It can be safely said that retail banks aim to offer customers financial products and services for life, from college loans to retirement accounts and trusts. It should be noted that retail banking is a very competitive field. With so many persons requiring retail banking products, many are shopping around to find the most lucrative offers, as well as the best rates, incentives, rewards plans, and deals. Retail banks compete by offering perks (e.g. credit monitoring, travel credit cards), low interest rates, and other services aiming to attract new customers. Many retail banks offer incentives such as balance transfer credit cards which allow clients to transfer balances to credit card accounts at their bank. Some banking establishments are, in fact, international corporations with many offices and branches. Other retail banks only have national presence. Some of them may be singlebranch banks or they may operate regionally. Community banks, for example, may provide products and services intended to meet the needs and requirements of community members. These may include home or business loans, mortgages, and other financial products. In fact, community banks often offer better interest rates than the big banks. Community development banks are one type of banks in the United States that work to boost economic development and growth in moderate- and low-income communities and geographic areas. They aim to serve the members of these communities and are certified by the US Community Development Financial Fund. To become certified, community development banks should have as their main goal community development. These banks offer a variety of retail banking services to customers in economically underdeveloped areas. Postal savings banks are another type of retail banks run by postal savings systems. Their mission is to offer clients a convenient and save way to save money. In the USA, the Postal Savings System operated between 1911 and 1967, offering depositors annual interest of 2 percent. Private banks are another distinct type of retail bank, which are owned by general or individual partners. Only a few such banks operate in the United States, such as Brown Brothers Harriman & Co. Brown Brothers operates through 3 businesses commercial banking, wealth management, and investment banking. These businesses serve high net worth clients and corporate institutions. Savings banks also function as retail banks that accept savings deposits. They offer a variety of products and services, among which insurances and credit, savings products, and payments. These are available to mediumsized and small enterprises and individuals. In the US, for example, savings and loan associations accept deposits and offer different loans and mortgages.

stock broker
Banking Terms -> stock broker

Stock brokers are professionals who trade securities such as shares on behalf of investors. They buy and sell financial instruments through agency only firms or market makers and are sometimes employed by brokerage firms. Stock brokers offer different types of services, among which execution-only services. Here, brokers simply follow clients instructions on when to buy and sell securities. Discretionary dealing is another type of service through which stock brokers stick to the investment objectives of clients, then making all decisions to deal on behalf of clients. Finally, stock brokers also engage in advisory dealing whereby it is the brokers task to give advice on what types of shares to trade. The final decision, however, is in the hands of the investor. Stock brokers invest on behalf of corporations and individual clients, trading in the stock markets. They are members of a stock exchange, thus authorized to carry out transactions. Whenever corporate entities or individual investors want to trade stocks, they have to turn to a brokerage firm. Most often, stock brokers counsel and advise their clients on the most appropriate investment instruments. They explain clients how the stock exchange works and ask clients about their financial ability and requirements. This helps choose the best investment alternatives. Brokers can send our orders to the floor by phone or a computer. When making a transaction, they supply investors with a price. The latter pay for the securities, and the broker proceeds to transfer the stocks title, followed by performing certain clearing and settlement procedures. Basically, stock brokers are agents who charge a commission or fee as to execute buying and selling orders for investors. They can be firms that do the same on behalf of investors, also charging a commission for providing these services. Not long ago, only high net worth individuals could afford to use the services of brokers as to access the stock market. With the advance of Internet and advanced computer technologies, discount brokers have made appearance on the stock market. Discount brokers let their clients trade on the exchanges for a small fee, but they do not offer personalized service and advice. Anyone can use the services of discount brokers without worrying that they will have to pay a hefty fee or commission. Investors, who want to do research on their own, without wasting a lot of money, can use the services of discount brokers. This is an excellent option for investors with experience on the stock market. Beginner investors would be wise to avoid the services of discount brokers because of the use of advanced terms and systems. It is better to turn to traditional full-service brokers. Discount brokers such as E-Trade and TD Ameritrade also offer advanced trading systems which are a good solution for active and frequent traders. In addition, Bank of America and other brokers started offering no-commission trades to customers who hold certain amount with them. It should be noted that full-service brokers offer a wide range of services to their customers. These include tax tips, advice and research, retirement planning, and others. Naturally, the commission full-service brokers charge is higher compared to discount brokers. They are, however, very useful considering their expertise and knowledge. Fullservice brokers work directly with investors as to determine and meet their investment objectives. They either make transactions on behalf of clients or manage clients portfolios independently. While their services are pricey, they arent as exclusive as boutiques, for example. The latter are small-sized brokerage firms which offer limited products and services to certain clients only. Finally, other professionals perform similar roles to that of stock brokers. Financial advisors and investment advisors are among them.