3.2 Commercial Banks and 3.3 Central Banks

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…