Money Management

Overview Of The Banking System

Banking is a financial system that manages money and offers related services like insurance.

Banking is a complex set of activities involving transferring money from one party to another, whether between two people or large corporations who need financing to make investments or pay debts. Banks are where deposits are made, and withdrawals are taken from accounts by checking against checks or transfers between different bank accounts. Banking is a very old system, first appearing thousands of years ago and still in use today.

The basic functions of banking are accepting deposits, paying withdrawals, and lending loans at interest rates that may be fixed for several months (term deposits) or, more often, variable rates over a specific period (current accounts). A bank also provides access to other financial services, including savings and credit accounts, trade finance, and foreign exchange.

Banks have several different economic functions that are often grouped together into three different types. These are payment systems, safekeeping services, and financial intermediation. Payments systems allow people or businesses to transfer money from one party to another. Safekeeping services allow depositing money, surpluses, or valuables with a third party to protect them against theft or loss. Financial intermediation is where a bank lends out money from deposits made with the bank. It can be for investment purposes or to pay off debts owed to the bank.

Many banks offer a wide range of services to their customers. The main categories are current accounts, savings accounts, loan accounts, credit cards, and foreign currency bank notes. Current accounts are the most popular type of banking service in Australia. They include checking accounts, where checks can be drawn against balances held in the account, and savings accounts, where any money deposited will not earn interest. Credit cards allow cardholders to pay for goods or services on credit terms with their bank. It means the money does not have to be paid back until later but usually incurs an interest fee for borrowing the cash. Some banks issue foreign currency bank notes, which can only be used to buy foreign currency from banks.

Banking began in ancient history as the only way to store wealth. It grew up with other financial institutions such as insurance, mining, and shipping. As time progressed, banks were set up by governments to provide safe storage of money and assure good communication between rich people and governments.

Types of Banks

1. Commercial Banks

Commercial banks are banks that deal with the public and deal with the transmission of funds. The basic premise of a commercial bank is that it takes in money from people who want to deposit their money, and then it lends that money to people who want to borrow it. A commercial bank is a wealth storage unit for the public.
It is not just a vault or safe where money can be deposited and drawn upon as needed. They lend their capital to help businesses borrow when they need it most, for example, when starting or expanding their business.

2. Investment Banks

Investment banks are banks that do not deal with the public. Rather, they advise businesses and governments on financial and investment issues. It can range from borrowing money to bonds, insurance, and purchasing stocks and shares. Because they advise on investing money in your business or government project, their job is considered much more important than that of commercial banks.

3. Retail Banks

People own some banks, but the government owns most. Specifically, these banks are referred to as retail banks. These retail banks provide several basic financial services, such as savings accounts and loans, to their customers.

4. Credit Unions

Credit unions are unlike commercial banks because they do not deal directly with the public. Instead, they deal only with members of their own institution’s credit union and provide loans in addition to other basic banking services such as savings accounts and loans for members only.

5. Stock and Bond Banks

Stock and bond banks are also known as deposit-taking banks. They provide services such as depositing funds in bank accounts that have been deposited with them and then lending out the money at interest to customers who may need it. According to their website, these banks are called ‘Deposit-Taking Banks’ (DTB). The DTB website also states, “It is the responsibility of the DTB to make sure that all transactions involving its customers are conducted in accordance with law and will not risk the loss of any money entrusted to the DTB.

6. Mutual Banks

Mutual banks are also called cooperatives and nonprofit banks. They operate very similarly to commercial, investment, and stock and bond banks, except that their members operate them.

How To Choose A Bank

Choosing a bank can be difficult, especially if you have never done it before. First, you should look at all of the available banks, not only in your area but also in towns close to where you live. It will allow you to compare several banks at once and help you determine which bank is right for your needs based on factors such as location or fees.


It would help if you chose a conveniently located bank, perhaps near your home or workplace. That way, you can easily run errands without traveling too far or spending extra time getting there and back from trips to the bank.
First, take a look at which banks are available to you. Next, check out the fees that each bank charges. These fees can vary between banks, so you must compare all options and determine which features best suit your needs.


You should always ensure that you understand any fees associated with the bank services you choose. For instance, if you do not use your checking account much but have other accounts with the bank, you may get a lower overdraft fee or a lower monthly fee if your balance is above a certain amount.

Customer Service

Customer service is something that most people neglect when choosing a bank, but it can be an important factor in your decision-making process.

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