What is a Bank?
Banking, in simpler words, is a bunch of financial tasks like opening an account, storing money, managing it, lending money to people and businesses, and issuing debit and credit cards by a financial institution called a bank. The job of a financial institution is to manage the movement of cash from one place to another.
A bank is a financial institution that keeps your money secure in deposit accounts. It works the same way your piggy bank holds your money but in a more professional and safer setting. You must note that banks do not run their operations by simply securing your money.
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If a person or a business takes a certain loan amount from the back, they have to pay that back with interest calculated as per the time. Therefore, banks mostly earn from the interest they receive on the loan amount from borrowers.
How Does a Bank Work?
Banks get most of their profit from the interests levied on the loan amount they lend to the borrowers. Banks use the money they receive from deposits or savings accounts of people to lend it to a person or a business. In exchange, they charge a higher interest rate than what they pay to people for using their bank to store money.
Apart from it, they earn from additional fees imposed on their customers, too; however, mainly, they earn from the interest on the loans they provide. Fees refer to the amount you will have to pay for purchasing any financial services or products they offer.
However, a few mobile banking services charge fees from the vendors instead of their users for running debit cards.
Types of Banks
You can categorize banks into many types of divisions based on either their size and scale or the services they provide. However, the simplest way to divide them is given below:
These banks have physical branches that you can visit during their operational hours. They offer a higher number of services than their online counterparts. On the downside, they charge a hefty fee to keep their physical branches running along with their staff.
These banks carry out all of their operations online and are available 24/7. They have no hidden fees as most of their operations are carried out online, and no physical branches, equipment costs or paid staff are required to be in a physical branch. Also, the savings accounts they offer come with very low minimum balance requirements.
Are Teenagers Eligible To Have Bank Accounts?
Now that you know all about banking, how it works and its types, can teenagers have bank accounts? Yes, of course. Teenagers can open their checking accounts at most banks from the age of 13. However, they will usually require one parent to be a joint owner until the child turns 18.
You can also open accounts in online banks by downloading a bank’s application and signing up along with your parents. Gone are the days of waiting for the piggy bank to get filled to the brim. You can have your own real account in an actual bank in just minutes.