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Understand the bank to better invest

What do you need to know about banking and banking services? In fact, understanding the bank is not easy. Tit is the idea that I will develop in this article. In fact, it is opportune for you to educate yourself in order to better invest your money.

Here's what you need to know first. The fight against poverty essentially through financial inclusion. Fortunately, many people nowadays have understood this. This is why banks on a daily basis welcome more and more customers who seek services in order to include themselves financially.

However, you have to know how to choose your bank. People are generally not very enthusiastic about the idea of choose a checking account or a savings account For example. make the wrong choice can be extremely expensive.

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To help you better invest or place your money, I invite you to read this article to the end to understand how banking and banking services work.

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???? What is a bank?

The banks are financial intermediaries. They have a key role to play in financing the economy. Banks connect people who have excess funding with those who need funding.

They perform a multitude of functions including deposits, withdrawals, currency exchange, currency trading and wealth management.

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In short, they act as a link between depositors and borrowers. They use the funds deposited by their customers to provide credit facilities to people who want to borrow.

🌿 How does a bank work?

To understand this paragraph, I would first like to ask you some questions. Have you ever wondered:

  • What does my bank do with my deposit?
  • Does it go in a safe somewhere?
  • Will I ever get this money back?

The answer to these questions is simple. Here's what you need to know first.

➤ How does a bank make money?

When a person deposits money in their bank account, the bank can then lend that money to other people. That's what we call financial intermediation.

The depositing client earns a small amount of money in return (interest on deposits). The lending customer in return pays a larger sum of money to the bank (interest on loans).

To earn money for herself, the bank keeps the difference. I often joke that this traditional way of making money is the 3-6-3 rule.

That is, the bank borrows silver at 3% (low rates), lends it at 6% (high rates) and pocketing the difference (3%).

➤ What are the bank's products and services?

Keeping large sums of money at home can be risky. Even if the chances are low, there is always a risk of loss, theft or even natural disaster.

When you deposit money in an insured bank, it is protected up to authorized limits. Besides this offer offered by the bank, there are other products and services offered by the bank. Here they are.

✔️ Current accounts

A current account is a service provided by most banks that allows individuals and businesses. Current account terms and conditions may vary from bank to bank.

In general, a checking account holder can use personal or business checks instead of cash to pay their debts. Most checking accounts allow customers to withdraw their money atusing an ATM.

✔️ Savings accounts

A savings account can help you separate the money you want to save from the money you need to spend. For many, it's an easier way to achieve a goal, like saving for home improvements or building an emergency fund.

Most savings accounts can automatically transfer money from your checking account to your savings account each month, so you don't even have to think about doing it yourself.

An added benefit is that banks usually pay you interest on these savings accounts. It's from "free" money which can help you reach your financial goals a little faster.

✔️ Money market accounts

A money market account is a type of savings account which often pays higher interest rates than a traditional savings account. The more you save, the more you can earn. But remember that the number of withdrawals per month is limited due to federal laws.

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✔️ Certificates of deposit

A certificate of deposit is a type of bank account where you agree to keep your money in the account for a certain period of time, from 6 months to 5 years. The longer you save, the higher the return.

You can always decide to withdraw your money earlier. However, there is a penalty for withdrawing before the end of your certificate of deposit term.

✔️ Individual retirement accounts

These are long-term retirement investment accounts. Income from these accounts grows tax-deferred. You cannot access the funds until you reach retirement age without incurring penalties and tax consequences.

✔️ Debit cards

A debit card or check card looks like a credit card. It offers an alternative payment method to cash when making purchases. With a debit card, you can pay for your daily expenses with a simple swipe (and usually your PIN).

✔️ Credit cards

A credit card allows you to pay for items with a line of credit. Essentially, you borrow money and then pay it back when the bill comes.

But remember that different credit cards charge different interest rates, so it's important to know what you're accepting (so as not to pay too much in the long run).

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✔️ Other banking services

Most financial institutions offer more than just savings and checking accounts. They can provide a variety of lending tools such as personal loans, student loans, auto loans, credit cards, and mortgages.

So, always ask yourself the question: is my bank a Islamic bank or conventional bank? See our article on the particularities of Islamic banks.

???? How does the bank offer its products and services?

To offer its services and Products, the bank has several ways to do it. It goes through branches, online and mobile banking, telephone banking. Let's take a step-by-step look at these methods of providing banking services.

➤ Banking services offered by branch

A bank branch is a physical location where your banking can be done in person. You can go to a branch for a roll of quarters or a cashier's check that you need right away.

You may want to rent a safe to store valuables or important documents.

Or maybe you just prefer to speak to a banker in person when you have questions about how to choose the right products and services for your financial needs.

➤ The offer of online and mobile banking services

Many banks allow you to manage your money from a computer or a smartphone connected to the internet. Some online banking and mobile apps allow you to bank from almost anywhere at your own pace.

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With a 24/24 access, you can do everything from managing multiple accounts to paying bills to transferring money.

➤ The offer of telephone banking services

Some banks allow you to bank over the phone. You just need to call a phone number and speak to a bank employee to be served.

These services may relate to checking your balance, transferring money, paying bills or other banking needs.

If you are calling outside of your bank's normal business hours, you may need to use an automated system that will guide you through the steps necessary to complete your transactions.

This is precisely where artificial intelligence comes into play. Consult our article on the place of artificial intelligence in business.

🌿 The different types of banks

There are many types of banks in the world and each has its own purpose. Know the types of banks available to you is important for making financial decisions.

Whether you want to open a savings account or take out a loan. Learn about the different types of banks and the people who serve them best.

➤ Commercial banks

Commercial banks serve both individuals and businesses. They usually have several well-located branches in an area and offer a wide range of services.

➤ Savings and Credit Banks (EC)

EC banks tend to have lower fees than commercial banks. In some cases, the service may be better due to the lower number of customers in particularly small banks.

➤ Virtual banks (online)

Virtual banks are all online, so there are no branches. In many cases, they don't even send paper statements.

Customers receive their monthly statements by email to view or print online. Check out our guide to online banks: how do they work?

➤ Mutual fund and brokerage companies

These banks often offer very limited banking services with free or low-cost checks linked to some remunerated money market funds.

➤ Investment banks

Investment banks serve as intermediaries and advisors to large corporations, governments, hedge funds, and other financial institutions. They serve these large organizations by helping them manage complex financial tasks.

Some of their main functions are to help companies provide titles to the public. They also facilitate fundraising for business expansion. They also aim to facilitate large mergers and sometimes even serve as financial advisors.

🌿 How to choose a bank that suits you?

Bank or credit union? Should I choose an online bank or a physical bank? Islamic bank or conventional bank?

There are many choices when it comes to choosing the right financial institution. Each has its own advantages and limits. By understanding them, you can decide what is most important to you.

In fact, choosing the right bank is a important financial decision. Make sure you understand all of your banking options, products and services. Besides, I invite you to explore some criteria which, in my opinion, allow you to choose a good bank.

➤ Think about the types of accounts you want to open

Do you just need a basic checking account or are you looking to save? Decide on the types of bank accounts you want, then find a bank that offers what you're looking for.

➤ Discover the other services offered

Some people like to manage all their finances with the same company. If you want to do more than just store your money in a bank, see if they offer any of the following products and services: investment accounts, mortgages and other loans (personal, auto, private student loans).

➤ Look for low-cost establishments

You don't want to lose money opening a bank account. Suppose you have three accounts with an institution, and they charge a monthly fee for each account. It can really add up!

As for monthly service fees, you'll likely need a bank that offers one of the following: No charges, Fees you can waive, Low fees, Overdraft fees, etc

➤ Choose between a physical bank and an online bank

Decide whether you want a bank with physical locations or an online bank. You might prefer a physical bank if you like being able to walk into a building and talk to a banker in person.

But online banks usually charge lower fees and pay rates higher interest.

➤ Make sure your bank is accessible

If you like physically entering your financial institution, look at which banks and credit unions have branches near your place of residence or work. If you travel a lot, you might appreciate an institution with more branches.

Otherwise, you might just want to go with what works for you. If you use an ATM for many transactions, check how many there are in your area and how much will it cost you to use it.

Many credit unions have a community charter. This means that if you live or work within the community they serve, you can become a member.

If you are considering a credit union, make sure you qualify for membership. The banks have no limits to their customers.

Article to read: What to know about bank accounts for children

If you prefer online or mobile access to your accounts, check out some bank and credit union websites. Most offer online banking services and mobile, but some may be more accessible than others.

➤ Consider the type of bank: Islamic or conventional

If you want to carry out interest-free transactions, opt for Islamic banks. They are participatory banks because they share losses and profits with their customers. They are completely different in the way they operate. The reality is that Islamic finance has its principles.

🌿 Summary...

By better mastering the operation of banks and the various investments, you will be able to invest knowingly and serenely build up your assets. Tout is a question of balancing return, risk and investment horizon according to your objectives. 🎯

So, are you ready to embark on the investment adventure? The game is well worth the effort to secure your financial future! 💪💸 Feel free to send me your comments to improve this blog post. Have a good day !

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Go for it Good luck

Faustin Djoufouet

I am a Doctor in Finance and an Expert in Islamic Finance. Business consultant, I am also a Teacher-Researcher at the High Institute of Commerce and Management, Bamenda of University. Group Founder Finance de Demain and author of several books and scientific articles.

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