Chapter 44

You should be able to:

distinguish between deposit/savings accounts and current/cheque accounts

describe services and documents provided to personal and business customers, including: paying-in slip, bank statement, night safe, ATM services, internet banking, telephone banking

explain when each service and document would be used

Everybody who engages in commerce needs banks.

 

1. Why do people and businesses need the assistance of banks?

to manage their money

to provide bank accounts and means of payment

to provide finance and savings facilities

2. What are banking and finance?

They are aid to trade concerned with methods of payment, providing loans and other finances as well as bank-related services.

3. What is commercial bank?

Bank that provides a range of banking services to both business and private customers.

4. How does a commercial bank earn money?

from the interest charged on the money they lend

from the charges for banking services provided to customers

from commission on foreign currency dealings

5. What are the banking services provided by commercial banks to their customers?

Deposit services - to provide safe keeping for cash deposited in the current, savings and fixed deposit accounts

Payment services - to provide a convenient and safe means of making payments through the current account or by way of bank drafts and bank transfer

Loan services - to provide finance by way of loan or overdraft

Finance services - to provide advice on financial investment or on the credit standing of the customers

Commercial banks also lend to governments, make investments, buy and sell foreign currencies and finance projects both in the home country and overseas.

6. What is a savings/deposit account?

An account which encourages people to save money not needed for immediate use and earn interest.

7. Who uses savings/deposit account?

It is used by individuals, businesses and associations to keep money not needed for immediate use and earn interest.

8. How is money deposited into the account?

By completing a deposit slip / paying-in slip / credit slip, or by electronic banking transfer.

9. How is money withdrawn from the account?

By using withdrawal slips.

10. How can one transfer money to another person using savings/deposit account?

By drawing out cash or by electronic banking transfer.

The bank may require prior notice for withdrawal of large amount of money because the bank lends the money deposited to others so it needs time to gather the money intended to be withdrawn.

11. Can depositors withdraw more money than they have in the account?

They cannot. The savings/deposit account may not be overdrawn.

Cheques are not issued with this type of account. Therefore, any transfers to another person or account must be done by drawing out cash or by electronic banking transfer.

12. What is a fixed deposit account?

An account into which money is deposited, with the intention of keeping it in the bank for a set period of time to earn higher rate of interest.

13. Who uses fixed deposit account?

It is useful to individuals, businesses and associations who have excess money which can be set aside to earn interest. For businessman, the fixed deposit accounts enables him to build up sufficient reserves to finance his business when the need arises.

14. What is a current/cheque account?

An account that provides the account holder with a variety of services including methods of payment, deposit services and possibly an overdraft facility.

The current/cheque account provides a safe place for keeping money that needs to be available for immediate use.

15. Who uses current/cheque account?

It is useful to individuals, businesses and associations who need a convenient and safe method of facilitating their receipts and payments. They can make use of other current account services like overdraft, standing order, direct debit and credit transfer.

16. What are the things that the bank will provide for a current/cheque account holder?

a book of paying-in slips to pay money into the account, although money can be easily transferred in electronically

a cheque book so the account holder can make payments to others, although this may also be done in other ways, including electronically

various bank cards

17. State the benefits of having a current/cheque account.

immediate access to cash

can make deposit and withdrawals of cash

access to full range of banking services, like night safe facilities, internet or telephone banking

use of ATMs

automatic payment services available

regular bank statement

18. What is paying-in slip?

It is a form used for depositing money into a bank account.

19. What is bank statement?

It is a document available to the customer to show details of the customer's bank account.

20. Why do banks send a bank statement on a regular basis to account holders?

It is to tell the account holders

how much has been paid into the account

how much has been paid out

any charges the bank has deducted from the account

the balance left in the account at the time of issue of statement

21. What is a night safe?

It is a chute in the wall of a bank that enables people to deposit money after banking hours.

Deposits can be made using special envelopes provided by the bank. The depositors fill in the details of his/her account on the envelope and the amount being deposited. The funds are added to the trader's account when the bank opens.

22. What is an Automated Teller Machine (ATM)?

It is a machine provided by banks that allows account holders to obtain cash and other services at any time of day or night by using a PIN (Personal Identification Number).

When a customer opens a bank account, he/she is issued with an ATM card which also doubles as a debit card.

23. What can people do with ATMs?

Obtain cash

Deposit money and cheques

Obtain bank statements

Change their PIN

Transfer money between accounts

Make payments, including card bills

Check account balances on screen

Top-up mobile phones

Obtain quotations for loans, but not apply for loans

24. Where would ATMs be usually located?

They are usually located outside banks, at airports, at large supermarkets and shopping malls.

25. Why do banks provide ATMs?

To provide easy access to some bank services and enable bank services to be available to customers after banking hours.

Banks are not available everywhere. ATMs enable banking services to be made available away from bank premises.

They help to save the labour costs of banks.

They help to speed up banking transactions and reduce bank queues.

26. State the disadvantages to customers using ATMs.

Customers have to remember their own PIN.

The machine may break down or run out of cash.

There is danger of theft or being mugged at an ATM.

Customers may be provided with only a limited range of bank services.

27. Why do some customers dislike using cashpoints (ATMs)?

It is because they are afraid of being robbed and card fraud.

28. What is internet/online/virtual banking?

It is banking online using a bank's website.

29. What can people do with internet banking?

They can make payments and pay bills.

They can view balances and transactions, and obtain bank statements electronically.

They can pay credit card bills.

They can change their PIN.

They can create, amend and cancel standing orders.

They can update personal contact details.

They can manage standing orders and direct debits.

They can transfer money between accounts.

They can request borrowing facilities such as loans and overdrafts.

30. State the advantages to a customer of having an internet bank account.

It allows people access their internet bank account from anywhere at any time.

It saves people, especially those who work, from having to visit the bank in person.

It provides detailed information on bank services and provides a message board where questions can be asked about bank accounts.

31. State the disadvantages to a customer of having an internet bank account.

It may be difficult to obtain answers to difficult problems.

An internet bank account does not provide cash and the account holder cannot pay in cash or cheques.

There is danger of fraud.

32. State the advantages to the bank of having internet banking customers.

Bank can save on staff costs, premises and equipment in bank branches.

Bank may be able to concentrate on providing other services aimed at particular kinds of customers.

Bank is able to help many more customers in a shorter time.

With the use of computerised services, it may also be able to reduce human error.

Bank can advertise its services on the internet and use the internet to market its services.

Bank can monitor the services offered and make improvements if needed.

Bank is able to offer its services 24 hours a day, 7 days a week so that customers can conduct their banking business when they wish.

33. What kind of services does internet banking provide for a business?

24-hour access to accounts

Save time in visiting the bank branch.

Provides automatic log-off after a predetermined period of inactivity.

Business is able to review borrowing requirements and borrowing commitments.

Business is able to access all of the business' accounts, like loan account, current account and savings account.

Business can manage the staff pension scheme.

Business can view balance in a choice of currencies.

Business can view and cancel standing orders and direct debits.

Business can pay bills automatically.

Business can organise payroll - pay salaries to many employees using bank giro.

Business can collect payments from many customers using direct debits.

Business can apply for letters of credit.

Business can move funds between linked accounts or to other accounts in other banks.

34. What is telephone banking?

It uses telephone to conduct banking business. An individual security number is required.

35. What can people do with telephone banking?

They can check the balance on accounts and credit cards.

They can obtain details of recent transactions.

They can transfer money between accounts.

They can make payments, including credit card payments.

They can set up and cancel standing orders.

They can arrange an overdraft or personal loan.

They can discuss credit card needs.

They can order travel money.

They can request replacement cheque books, paying-in books or cards.

They can stop cheques and direct debits.

They can order bank statements.

They can report lost or stolen cards.

The advantages of telephone banking to the customer and to the bank are very similar to those relating to internet banking.

36. What are the disadvantages of telephone banking?

Often insufficient detail is given about individual transactions, for example, standing orders and direct debit.

It may be difficult to hear clearly so numbers can be confused with one another.

Going through an automated telephone 'menu' can be very irritating.

The account holder may give the wrong security number or press the wrong key on the telephone and so the account may be locked until contact is made with the bank.