Financial institutions in the U. S. A

Businesses that distribute or deal in money are called financial institutions. New institutions that meet new financial needs are appearing almost every day in the USA. The most familiar institutions are commercial banks, savings banks, savings and loan associations, mutual savings banks, credit unions, investment banks and so on.

A commercial bank is a privately owned profit-making corporation. It serves both individuals and businesses by offering checking and savings accounts, loans, and credit cards. It also deals in some brokerage, insurance, and financial advice.

The commercial bank is the most important source of short term loans for businesses. Sometimes the borrowers pledge collateral to back up the loan. Such loan is a secured, loan. Companies with a good financial position are given the prime rate of interest which is the lowest commercial interest rate.

The commercial bank offers its customers accounts of two types: demand deposits and time deposits. A demand deposit makes the money in it available to depositors immediately, while a time deposit requires depositors to leave their money with the bank for a stated period of time.

Most banks offer their customers various savings certificates, called certificates of deposit. Savers may put their money into thirty day, six month, or two and a half year certificates. The highest interest is paid to the customers who deposit their money for a longer period.

Banking services are not free and banks charge fees for them. Many banks assess a service fee if an account balance falls beneath a particular minimum, such as $200.

There are two types of commercial banks. A national bank is chartered by the federal government. About one third of all commercial banks are national. A state bank, which is smaller than a national bank, is chartered by an individual state.