Banks have come a long way since the Middle Ages, when merchant banks first formed in Italy to allow commodity traders to use their excess capital to invest in foreign trade. Today's banks are much more than just a place to park your savings and take out a loan to buy a house or car. Banks offer a range of other services, including credit cards, money management, and retirement planning.
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One of the ways banks attract money is to offer people interest for putting their money in the bank. Among the accounts offered by most banks are checking and savings accounts. Other types of accounts include money market accounts and brokerage accounts. Often, the more money you put in these accounts, the higher interest rate you can earn.
Banks make a large portion of their profits by loaning out the money they take in at a much higher rate than they are paying to the depositor. The kinds of loans most banks make include mortgages, car loans, and business loans. Many banks also make unsecured loans, such as personal loans, and some larger banks may loan money on margin for customers to buy stocks and commodities.
The most common type of investment most banks offer is a certificate of deposit, which is similar to a savings account, but requires that you not withdraw your money for a certain period of time, such as six months or a year. Some banks also offer their own mutual funds, and many banks offer retirement investments such as individual retirement accounts.
Many banks offer their own credit cards. Although any commercial bank can offer a credit card, it is usually only large national and regional banks, such as Bank of America and Wells Fargo, that do so. Some large banks may offer multiple cards to cater to different demographics.
Banks offer a host of other services. Among these are money management and retirement planning, insurance, bill-paying services and safety deposit boxes.