Banks

In addition to transacting funds, banks encourage individuals to save their wages at these institutions.  Through offering interest rates for lending your money to a bank in the form of a savings account, individuals can earn interest rates in regular savings accounts, certificates of deposit, and a plethora of other interest bearing financial instruments offered by many banks.  

Banks are a critical aspect of our economy.  A key purpose of banks is to ensure that the currency provided by bank account holders is insured.  The Fed insures individual bank accounts up to $100,000, and for Individual Retirement Accounts, the Fed insures individual depositors up to $250,000.  Banks generate profits by lending money to others for their personal and/or business needs, such as college education, purchasing a new home, starting a small business, automobile loans etc.  The interest charged on the principle amount then profits the banking institution.

The Federal Reserve has a direct influence on the total amount of money that a bank lends.  At this time, the Federal Reserve requirement is three to ten percent of the total deposit of the bank.  The success of a bank remains in the trust of patrons.  It is important that consumers have the complete confidence in knowing that banks will help protect and grow their money.  Because of security, integrity, and nature of the banking industry, it is extremely regulated by the government.  The most well known regulatory body of the American banking industry is the Federal Open Markets Committee of the Federal Reserve System.  These two entities are collectively known as the Fed in most instances.  Following the activity of the Fed can lead to a much better understanding of the banking industry as a whole.

There are several different types of banking institutions, such as:

• Commercial banks
• Thrift institutions
• Savings banks
• Savings and loan associations
• Cooperative banks
• Credit unions