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A bank is a business that provides banking services for profit. Traditional banking services include receiving deposits of money, lending money and processing transactions. Many banks offer other financial services to make additional profit; for example: selling insurance products , investment products or stock broking .

Traditionally, a bank generates profits from transaction fees on financial services and from the interest it charges for lending. In recent history, with historically low interest rates limiting banks' ability to earn money by lending deposited funds, much of a bank's income is provided by overdraft fees and riskier investments.

Services typically offered by banks

The type of services offered depends upon the type of bank. Services provided usually include:

  • Taking deposits from their customers and issuing checking and savings accounts to individuals and businesses
  • Extending loans to individuals and businesses
  • Cashing checks
  • Handling money transactions such as wire transfers and cashiers checks
  • Issuing credit cards , ATM cards , and debit cards
  • Storing valuables, particularly in a safe deposit box
  • Financial transactions can be performed through many different channels :
  • Branch
  • ATM
  • Mail
  • Telephone banking
  • Online banking

  • A savings and loan association is a financial institution which specializes in accepting savings deposits and making mortgage loans. Savings and loans were given a certain amount of preferential treatment by the government so they are allowed to pay higher interest rates on savings deposits compared to a regular commercial bank.
  • A credit union is a not-for-profit cooperative financial institution that is owned and controlled by its members. Only a member of a credit union may deposit money with the credit union, or borrow money from it.
  • A credit union differs from a traditional financial institution ( banks , savings and loan , etc.) in that the members who have accounts in the credit union are the credit union's owners. A credit union is a co-operative institution. As such, credit unions have historically marketed themselves as providing superior member service and being committed to helping members improve their financial health. Credit unions typically pay higher interest rates on deposits and charge lower interest on loans than banks. Credit unions offer many of the same financial services as banks, including savings accounts , checking accounts, credit cards , certificates of deposit and home banking.

  • Types of Accounts

  • A bank account is a monetary account with a bank recording the balance of money for a customer.
  • Bank accounts may have a positive or credit balance where the bank holds money on behalf of the customer; or a negative or debit balance where the customer owes the bank money. Bank accounts are sometimes called deposit accounts. Some banks charge a fee for this service, while others may pay the client interest on the funds deposited. The account holder retains rights to their deposit, although restrictions placed on access depend upon the terms and conditions of the account and the provider.
  • A checking account is a deposit account held at a bank or other financial institution , for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels.


A demand account allows the account holder to make or receive payments by:

    • cash money
    • check and money order (paper promise to pay)
    • funds transfer and direct deposit
    • direct debit (pre-authorized debit)
    • standing order (automatic funds transfer)
    • debit card or ATM card
    • cashless direct payment at a store or merchant
    • All demand accounts offer itemized lists of all financial transactions, either through a bank statement or a passbook .
    • There are several ways to access funds held in a demand account:
    • Branch network
    • Automated Teller Machine (ATM)
    • Telephone and Online banking
    • Mail banki
    • Stores and merchants providing EFTPOS access.
    • An overdraft occurs when withdrawals from a bank account exceed the available balance , in other words, you spend more money than you have in your account. This gives the account a negative balance. There is usually a charge for overdrafts.
    • Savings accounts are accounts that pay interest but can not be used directly as money (by writing a check for example) These accounts let customers set aside a portion of their liquid assets that could be used to make purchases while earning a monetary return.
    • Obtaining funds held in a savings account may not be as convenient as from a demand account. For example, one may need to visit an ATM or bank branch, instead of writing a check or using a debit card.
    • Some savings accounts require funds to be kept on deposit for a minimum length of time, but most permit unlimited access to funds. True savings accounts do not offer check-writing privileges, although many institutions will call "savings accounts" their higher-interest demand accounts or money market accounts.
    • All savings accounts offer itemized lists of all financial transactions through a passbook or a bank statement.
    • An Individual Retirement Account (or IRA) is a retirement plan account that provides some tax advantages for retirement savings. You can contribute up to $2,000 per year into an IRA. These investments are called "contributions." Typically an income tax deduction is available for the tax year for which the funds are contributed. The contributions, as well as the earnings and gains from these contributions, build up tax-free until you withdraw the money from the account, usually after age 59 1/2. You enjoy the ability to generate additional earnings, unreduced by taxes on these earnings, each year the funds remain within the IRA. The withdrawals of the funds from the IRA are termed "distributions." Distributions are subject to income taxation, generally in the year in which you receive them.
    • Since the original purpose of the IRA is to help you to provide for your own retirement, there is a penalty for withdrawing your IRA funds prior to an assumed retirement age of 59 1/2.
    • You can also put away up to $500 per year into an education IRA. The money grows tax-free and has preferential tax treatment upon distribution to the beneficiary who uses it for authorized education expenses. These plans are not very common in that they are very restrictive on who can make contributions to them, the amount of total contributions allowable each year, and the limitations on what exact education expenses qualify.
    •  Any questions about IRA’s should be discussed with a financial planner.
    • A loan is a type of debt. A loan is an agreement to lend money for a certain period of time, to be repaid by a specific date. The borrower initially receives an amount of money from the lender, which they pay back in regular installments, to the lender. This service is generally provided at a cost, which is known as interest on the debt.
    • Unsecured
    • These may be available from financial institutions under many different guises or marketing packages:
    • credit card debt
    • personal loans
    • bank overdrafts
    • credit facilities or lines of credit
    • The interest rates applicable to these different forms may vary depending on the lender.
    • A mortgage is a very common type of loan, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security---a lien on the title to the house---until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
    • In some instances, a loan taken out to purchase a new or used car may be secured on the car, in much the same way as a mortgage above, although the duration of the loan period is considerably shorter, quite often corresponding to the useful life of the car. Where this is not, it will be another form of consumer credit.


    • Credit is often loosely referred to as money. Money is used to buy goods and services, and pay for them immediately, but credit buys goods and services on the promise to pay with money in the future. Credit (as in the term "credit card") is the giving of a loan and the creation of debt. Sometimes, credit is not granted to a person who has financial instability or difficulty. Companies will frequently offer credit to their customers as part of the terms of a purchase agreement.
    • A credit score is a number typically between 300 and 850, based on a statistical analysis of a person's credit files, to determine the likelihood that the person will pay his or her bills. A credit score is primarily based on credit report information, typically from the three major credit reporting agencies.
    • Banks and credit card companies use credit scores to evaluate the risk posed by lending money to consumers and to lessen losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits.
    • A debit card is a plastic card which provides an alternative payment method to cash when making purchases. While the card looks like a credit card, it is used more like writing a check as the funds are withdrawn directly from the cardholder's bank account; some cards are referred to as check cards.
    • The customer's card is swiped through a card reader or inserted into chip reader and the merchant usually enters the amount of the transaction before the customer enters their account and PIN . There is usually a short delay while the EFTPOS (Electronic Funds Transfer at Point of Sale) terminal contacts the computer network (over a phone line or mobile connection) to verify and authorize the transaction.
    • Sometimes the debit card is multipurpose, acting as the Automatic Teller Machine (ATM) card for withdrawing cash and as a check guarantee card. Merchants can also offer "cashback"/"cashout" facilities to customers, where a customer can withdraw cash along with their purchase.
    • A credit card is different from a debit card in that it does not remove money from the user's account after every transaction. In the case of credit cards, the issuer lends money to the consumer (or the user). It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged. Both debit and credit cards can be used for telephone and Internet purchases.
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JULY 2007
7/01/07 MEETING
Copyright © 2007 Utah Attorney General