3.2 Commercial Banks and 3.3 Central Banks

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3.2 Commercial Banks

Commercial banks are high-street banks.

Commercial bank activities

  1. Keeping money safe – you can put your money into different types of accounts.

  • Current accounts are used for regular spending and paying bills

  • Deposit/Savings Account is for money you save up for later. This earns a higher interest rate

  1. Lending money – to individuals and companies

  • Loans - you borrow money for several months/years to buy something specific e.g. kitchen

  • Overdrafts – the bank lets you spend more than you have in your account but expects it to be payed back soon

  • Credit cards – you can choose to only pay back the money you’ve spent a bit at a time

  • Mortgages – a big loan for something like a house or factory which is payed back over a long period. The bank keeps the deeds.

  1. Means of making payments

  • Cheques

  • Electronic transfers

  • Credit/debit cards

  • Standing orders – you tell the bank to pay the same amount to a person every month

  • Direct debit – allows someone to take how much you owe them

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