Banking 101: Banking Products and Services | Capital One (2024)

November 2, 2022 |5 min read

    At its most basic level, a bank is a place to safely keep your money. But beyond the basics, banks usually offer a wide range of products and services designed to make managing your money a bit easier.

    From car loans to credit cards, there are plenty of banking services you may need at different stages of life. And with digital options, you can access many of them right from your phone or laptop. Below is a review of financial topics that may help you learn banking basics. There’s also a glossary of terms at the end.

    Why should I put my money in a bank?

    Keeping large sums of money at home can be risky. Even though the odds may be small, there’s always the chance of loss, theft or even a natural disaster. When you deposit money in a bank that’s insured by the Federal Deposit Insurance Corporation (FDIC), you’ll know that it’s protected up to allowable limits.

    Dealing with cash for everyday expenses can be a bit cumbersome. Besides that, a bank account allows you to track your expenses in a single place, which can be helpful if you’re monitoring a budget or building a savings account. Paying bills online can also simplify the process (as opposed to buying stamps and mailing checks).

    Another consideration? Interest. Cash hidden in the cookie jar or under the mattress can’t multiply. But an account that earns interest pays you just for keeping your money there. Rates of interest vary from bank to bank, and from account to account, so you may want to shop around before deciding where to stash your cash. Here’s more info on ways you can bank and services that are offered:

    Ways to bank

    A bank branch is a brick and mortar location where your banking can be done in person. You might pop into a branch for a roll of quarters or acashier’s checkyou need right away. You may want to rent a safety deposit box to store valuables or important documents. Or maybe you just prefer talking to a banker in person when you have questions about how to choose the right products and services for your financial needs.

    Online and mobile banking
    Many banks allow you to manage your money from a computer or smartphone—and lots of customers have embraced these options.

    Some online banking and mobile apps allow you to bank from almost anywhere on your own schedule. With 24/7 access, you can do everything from managing multiple accounts to paying bills totransferring money. For the banks offering mobile check deposit, simply snapping a photo of the front and back of a signed check will send the payment to the account you choose—no ATMs or extra trips involved.

    Round-the-clock access also helps some people stay organized. If balancing your checkbook on Sunday evenings suits you, no problem. As for staying ahead of your bills, most bank apps can text you a reminder that a bill is due or even alert you if your account dips below a certain dollar amount.

    Consumer and corporate banking
    What’s a consumer bank account? Just as you’d imagine, consumer banking refers to financial products geared toward everyday consumers. Also known as retail banking or personal banking, it’s the division of a bank that serves the general public.

    Corporate banking, on the other hand, refers to financial products that serve corporate customers. Also known as business banking, this division of a bank generally serves a wide range of clients, including small businesses, mid-sized businesses and large conglomerates that may have billions in sales and offices nationwide.

    Credit unions
    Many people wonder how a credit union differs from a retail bank. In general, credit unions offer the same services as a bank, such as checking accounts and personal loans. But unlike a for-profit bank, a credit union operates as a cooperative and is owned by its members.

    So how do you become a member? You’ll likely have to be a member of a group to use a credit union and its services, but this is easier than it sounds. Some credit unions simply require you to live in a certain town or city. Some cater to employees who work at the same company. And others affiliate with churches or schools. You may also be able to join if a relative is already a member.

    One thing to keep in mind about credit unions is that they may be smaller than many banks. So there may be fewer locations, ATMs, credit card options and credit card rewards programs.1

    The FDIC does not insure credit unions, however, the National Credit Union Administration (NCUA) offers the same type of protection to federally chartered credit unions.

    Online-only banking
    While most banks today offer online services, there are also banks that exist solely online. With lower operating expenses, those savings can often be passed along to customers in the form of lower monthly fees or higher interest rates on savings accounts.

    Telephone banking
    Some banks allow you the option of banking by phone. Simply call a phone number and speak to a bank employee to do things like check your balance, transfer money, pay bills or handle other banking needs. If you call outside of your bank’s regular business hours, you may have to use an automated system that will take you through the steps necessary to complete your transactions.

    Banking products and services

    Checking account
    When you’re thinking about what services banks provide, achecking accountmay be the first thing you think of. This popular type of account allows you to store and manage the money you use for everyday spending. Once set up, you can use a debit card or check, which will take money directly from your account, to pay for everything from groceries to gas to bills. You can also get cash from an ATM or branch using your debit card and PIN, a unique password you choose to protect your account.

    Savings account
    Asavings accountcan help you separate the money you want to save from the money you need to spend. For many, it’s an easier way to work toward a goal, like saving for home improvements or building an emergency fund. Most savings accounts can automatically move money from your checking account into your savings account each month, so you don’t even have to think about doing it yourself. An added bonus is that banks usually pay you interest on savings accounts. That’s free money that may help you reach your financial goals a little faster.

    Money market account (MMA)
    AnMMAis a type of savings account that often pays higher rates of interest than a typical savings account. The more you put away, the more you may be able to earn. One thing to keep in mind? There may also be limits on how many withdrawals you can make each month.

    Certificate of deposit (CD)
    ACDis a type of bank account where you agree to keep your money in the account for a certain amount of time.The amount of time can vary, but terms often range from as little as 6 months to as long as 5 years.

    The longer you save, the greater the return. You can always decide to withdraw your money early. However, there’s a penalty for withdrawal before the end of your CD term.

    Debit card
    With a debit card, you can pay for everyday expenses with just a swipe (and usually your PIN). The money will come straight from your checking account so there’s no need to carry cash if you prefer not to. Plus, if your debit card is lost or stolen, you may not be responsible for unauthorized transactions if you report it in a timely manner. Lost cash, unfortunately, is often lost for good.

    Credit card
    A credit card lets you pay for items with a line of credit. In essence, you’re borrowing the money and then paying it back when the bill comes. But remember that different credit cards charge different rates of interest, so it’s important to know what you’re agreeing to (so you don’t end up paying too much in the long run). One way to avoid paying interest is to pay your bill in full each month. You may also want to watch out for annual fees, especially if it’s a card with perks such as airline miles or cash back. Shopping around for a credit card with no annual fees is always an option.

    Finance terms 101

    An automated teller machine (ATM) is an electronic bank that allows you to complete basic transactions without a branch or teller. You’ll just need your debit card and secure PIN. Some ATMs also allow deposits of cash or checks. While you don’t need to use your bank’s ATM to access your cash, you might have to pay a fee to use others. Many credit cards allow cash withdrawals as well, but this “cash advance” can come with a hefty fee, so be sure to find out beforehand.2

    When your money is in a bank that’s backed by the FDIC, you’ll know it’s safe and secure up to allowable limits. That’s because the U.S. government protects FDIC-insured deposits in the very rare event that a bank fails.3You can use itsBankFindtool to see if your bank is a member and to look up the maximum limit of deposited funds that are insured.

    Anytime you put money into your account, you’re making a deposit. You can usually deposit checks or cash at a bank, ATM or even on your mobile phone.Directdeposit is when your paycheck is transferred to your checking or savings account by your employer automatically on payday, which can save you time.

    Anytime you take money out of your account, you’re making a withdrawal. Just like with deposits, you can take out funds at a bank branch or ATM. When you write a check, wire money or use your debit card, the money is withdrawn automatically from your account.

    When it comes to different types of banking products, fees can vary widely. But it’s also possible to find fee-free accounts and services that will likely suit your needs. Common fees for services rendered by some banks include monthly maintenance fees, overdraft fees and ATM fees. If you want to avoid paying extra, it can be worth shopping around and comparing offers.

    Now that you’re familiar with a few more financial terms, products and services, you may feel a bit more confident about managing your money. The more you know about what banks have to offer, the easier it may be to make a plan that works best for your lifestyle and personal financial goals.

    As someone deeply immersed in the world of finance and banking, it's crucial to recognize the multifaceted nature of these institutions and the services they provide. In the article you've shared, the author delves into various aspects of banking, from the fundamental reasons for entrusting one's money to a bank to the intricacies of different banking products and services.

    Let's break down the key concepts and terms mentioned in the article:

    1. Banking Services and Products:

      • Checking Account: A checking account serves as a hub for everyday financial transactions, allowing individuals to manage their funds conveniently through methods like debit cards, checks, and ATM withdrawals.
      • Savings Account: Savings accounts offer a secure place to store funds while earning interest, often used for achieving financial goals or building emergency funds.
      • Money Market Account (MMA): Similar to a savings account but typically offering higher interest rates, MMAs often come with restrictions on withdrawals.
      • Certificate of Deposit (CD): CDs involve depositing funds for a fixed period in exchange for higher interest rates, with penalties for early withdrawal.
      • Debit Card: Debit cards enable direct access to funds in checking accounts for purchases and withdrawals, providing a convenient alternative to cash.
      • Credit Card: Credit cards extend a line of credit to users, allowing them to make purchases and repay the borrowed amount within a specified period, often with added interest or fees.
    2. Banking Channels:

      • Branch Banking: Traditional brick-and-mortar branches offer in-person banking services, including assistance from bank staff and access to physical resources like safety deposit boxes.
      • Online and Mobile Banking: Digital platforms enable customers to manage their accounts remotely, offering features such as bill payments, fund transfers, and mobile check deposits.
      • Telephone Banking: Some banks provide banking services over the phone, allowing customers to perform transactions and inquiries via automated systems or with assistance from bank representatives.
    3. Types of Banks:

      • Consumer and Corporate Banking: Consumer banking caters to individual customers, while corporate banking serves businesses of various sizes, offering tailored financial solutions.
      • Credit Unions: Credit unions operate as cooperatives owned by members, providing services similar to banks but with membership requirements and potential limitations on offerings.
      • Online-only Banking: Fully digital banks operate without physical branches, often offering cost-effective services due to lower overhead expenses.
    4. Financial Terms:

      • ATM (Automated Teller Machine): ATMs provide self-service banking facilities for basic transactions like withdrawals and deposits, typically requiring a debit card and PIN.
      • FDIC (Federal Deposit Insurance Corporation): The FDIC insures deposits in member banks, safeguarding funds up to certain limits and ensuring depositor confidence.
      • Deposit and Withdrawal: Deposits involve adding funds to a bank account, while withdrawals entail removing funds, both accessible through various banking channels.
      • Fees: Banks may charge fees for services like account maintenance, overdrafts, and ATM usage, although fee-free options are often available.

    Understanding these concepts empowers individuals to make informed decisions about their financial management, whether it's selecting suitable banking products or utilizing convenient banking channels. As the financial landscape evolves, staying informed about banking fundamentals remains essential for navigating the complexities of personal finance.

    Banking 101: Banking Products and Services | Capital One (2024)
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