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Banking.mp4The 2008 Financial Crisis_ Crash Course Economics #12.mp4Banks offer services that have to do with money. For example, banks offer accounts that you can keep your money in. When you put money in a bank account, you trust the bank to look after the money.
The oldest bank in the United States
The oldest bank in the United States that is still around today is the Bank of New York. It was started by Alexander Hamilton in 1784. Today, the Bank of New York is known as the Bank of New York Mellon (or BNY Mellon for short) and has branches all around the world!
The Bank of New York was located in this house from 1784 to 1787 in New York City.
Today, the Bank of New York Mellon still has its main office in New York City, but now it is located in a skyscraper!
People often visit their local bank branch to use the bank's services. A branch is the local office of a bank. Banks can have branches in many different locations.
Online banking
Today, you probably don't have to visit your local bank branch to use bank services. Almost all banks offer services online. And some banks don't have any branches and offer all of their services online! Here are some of the ways you can use online banking:
You can log in to your account to see how much money you have.
You can transfer, or move, money between different accounts.
You can make payments.
You can see a list of the payments you have made.
People and businesses can use bank accounts to make deposits and withdrawals. You make a deposit when you put money into a bank account. You make a withdrawal when you take money out.
What is an ATM?
An automatic teller machine, or ATM, lets you use bank services without the help of a bank employee. You can find ATMs in towns and cities all around the world.
To use an ATM, you insert your account card or debit card into the machine and enter a personal identification number, or PIN. Your PIN works like a password to keep your account safe. After you correctly enter your PIN, you can see all of your account information, make deposits, and withdraw money!
Banks offer several different types of accounts. Two of the most common types are checking accounts and savings accounts. There are several differences between these accounts. For example, savings accounts usually offer the chance to earn more interest. Interest is money the bank pays you for keeping your money in an account.
People have choices about where to keep money. For example, other types of organizations offer some of the same services that banks do.
Can you open an account if you are under 18?
Yes! But you have to have an adult over 18 put his or her name on the account, too. Once you turn 18, you can open an account on your own.
Having an account at a bank, credit union, or savings and loan gives you a safe place to keep your money where it can earn interest. What are some other reasons you might want to keep your money in an account?
The balance in this account on May 5, 2017 was $36.31. On May 7, 2017 the balance was $522.11. The balance changed because $485.50 was put into the account.
An account statement is a record of how much money is in a bank account. About once a month, you get a bank statement for each account you have at a bank.
The amount of money in an account is called the balance. The balance changes when money is added to or taken from an account.
How would you spend your money?
Your balance shows you how much money you have to spend. You probably won't have enough money to buy everything you want, so you have to make choices.
Account statements also show a record of transactions. Transactions are the deposits and withdrawals made using an account. When you get money through a transaction, money is deposited into your account. When you use money for a transaction, money is withdrawn from your account. On account statements, deposits are shown in the credit column and withdrawals are shown in the debit column.
Keeping track of checks
When you buy something using a check, the money is not withdrawn from your account until the person or business you are paying deposits the check. Sometimes, the person or business might not deposit your check right away. If you don't keep track of the checks you write, you might accidentally spend that money on something else!
Your checkbook includes a place for you to keep track of your transactions.
You can check your account balance to see if a check you've written has been withdrawn yet.
It is important to keep up with your bank transactions so that you always know how much money you have. If you overdraw your account, or spend more money than is in it, your account will have a negative balance. A negative balance means you are in debt to your bank. In other words, you owe them money!
What happens if I overdraw my account?
If you try to spend more money than you have in your account, you will likely have to pay an overdraft fee. An overdraft fee is money you have to pay to the bank when you try to spend more than you have in your account. The amount of the fee depends on your bank and the type of account you have, but some banks charge up to $35!
Most banks will pay you interest for keeping money in an account. You can see the amount of interest you earn on your account statement each month.
The sooner you save, the faster your money can grow!
The longer you keep your money in an account, the more interest it will earn! For example, imagine you get $100 for your birthday. If you put it in a savings account that earns about 1% interest each year, here's how it could grow over several years:
$101 after 1 year
$103.04 after 3 years
$110.51 after 10 years
An extra $10.51 might not seem like a lot to get for saving your money for 10 years. But interest earnings can add up the more you save! For example, if you added 100 more dollars to your savings each year, your money could grow to $1,161.76 after 10 years!
Banks do more than just hold people's money. They also provide loans. A loan is a service that lets you borrow something, such as money, for a certain amount of time.
What kinds of things are loans used for?
Loans are very useful. They allow people to pay for big things that they cannot afford right away but that they could pay off over time. Often, people take out loans to pay for things that can improve their lives. Here are a few examples of different types of loans:
A mortgage is a loan to buy a house or other property.
An auto loan is a loan to buy a car.
A student loan is a loan to pay for college or other types of school.
A business loan is a loan to help cover the costs of starting a new business.
Whenever you buy something using a loan or borrowed money, you are using credit.
Credit is an agreement that lets you get something now and pay for it later. Credit helps people buy expensive things that they wouldn't be able to afford right away, such as houses, and pay for those things over time. It can also give people more options for choosing when to buy and pay for things.
Loans are one kind of credit, but banks also allow people to use credit in other ways. For example, many banks offer credit in accounts linked to a credit card.
Most of the time, credit lenders will charge interest.
This interest is different from the kind you earn from keeping money in a bank account. In this case, interest is a fee that you must pay on top of paying back the principal, or the money you borrowed. You can think of interest as the price you pay for borrowing the money.
For example, imagine you use your credit card to buy a new phone for $300. You decide to pay back $100 to your credit card account at the end of each month as well as any interest you were charged. Your card charges an interest rate of 12% per year, or about 1% each month, of the total amount you still owe.
The table shows your payments. Look at the table.
Banks and other lenders often use numbers called credit scores to try to measure how likely someone is to pay back borrowed money. The higher a person's credit score, the more willing credit lenders will be to lend them money. People with higher credit scores may also have to pay less in interest.
Credit scores can be affected by many factors. Read each factor below. Decide whether each would be more likely to make the person's credit score higher or lower.
Think about what would make you trust someone if you were lending them money!
Who decides my credit score and how can I see it?
Information about you and your history of using credit is collected by companies called credit reporting agencies, also called credit bureaus. They sell this information to banks and other businesses in the form of a credit report about you, which contains a credit score.
By law, you can get a free copy of your credit report from each of the three major credit bureaus once a year. You can order these reports online, over the phone, or by mailing in a form. You can also get a free report in other situations, such as if a credit lender doesn't give you a loan because of the information in your report!
Nowadays, there are also several convenient ways to keep track of your credit score online or through apps. Many banks offer a way for people to monitor their credit in this way.
You might be surprised to learn that when you deposit money in a bank account, the bank does not keep most of your money!
Banks have to keep a certain part of people's deposits as reserves so that people can withdraw money from their accounts when they need to. But banks actually use most of people's deposits to make more money! The diagram below shows how banks make money by loaning people's deposits out to borrowers.
According to the diagram, the events would happen in this order:
You deposit money in a savings account at the bank. On the diagram, this event is shown by the arrow pointing from "Depositors" to "Banks."
The bank keeps some of your deposit in its reserves and loans the rest of it to borrowers. On the diagram, these events are shown by the arrow pointing from "Banks" to the stacks of cash and the arrow pointing from "Banks" to "Borrowers."
Borrowers pay back the loans plus some extra interest. On the diagram, this event is shown by the arrow pointing from "Borrowers" to "Banks."
The bank pays a small part of the interest it gets from loans to people's bank accounts. On the diagram, this event is shown by the arrow pointing from "Banks" to "Depositors." It uses the rest to cover its costs or make more loans and earn more money.
Banks offer services related to money. For example, banks offer checking accounts that allow people to make deposits and withdrawals any time. They offer savings accounts for people to store money that they don't need to spend right away. Banks also offer loans and other credit services, which allow people to get or use something now and pay for it in the future.
Banks keep a small part of the money in people's accounts as reserves to make sure that people can withdraw money when they want or need to. But banks use the rest to make more money by loaning it out and charging interest, a fee that the borrower must pay on top of paying back the principal, or the money borrowed.
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