PF: Financial Institutions


Financial institutions help people manage their money, protect it, and make it grow. People often use different types of financial institutions at different stages of their lives. Some of these institutions are: commercial banks, savings and loan associations, credit unions, and brokerage firms. In the past, each type of financial institution offered specific and limited services.

Banks took deposits to be placed in checking accounts, savings accounts, and certificates of deposit, and they granted credit, often in the form of loans, to qualified individuals.

Savings and loans offered savings accounts and home mortgages. Credit unions, a type of member-owned cooperative, made low-interest loans available to their members.

Brokerage firms bought and sold stocks for customers on an exchange, and offered other financial services.

Deregulation in the financial industry has blurred the lines between these institutions and increased competition among them. Deregulation means that laws have been enacted to remove some of the restrictions or regulations that previously affected the industries in question. For example, savings and loans now can offer checking accounts and many types of loans in addition to home mortgages. Many commercial banks now can offer brokerage services.

Financial institutions offer many different services. Among the most widely used financial services is the checking account. A checking account allows you to deposit money into an account. You then can write checks, or use an ATM or debit card, to withdraw money from the account as you wish. A checking account also makes it easy to use online banking services to make payments. Checking accounts are sometimes called demand deposit accounts because depositors can demand or use the money in their accounts when they wish to do so. Only the depositors can write checks on the account. Financial institutions usually offer free or low-cost accounts which don’t pay interest on account balances. Usually there is a required minimum balance on accounts that pay interest.



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