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Traditional Services Provided by Financial Institutions

• Checking accounts– Check—a written order for a bank or other financial institution to pay

a stated dollar amount to the business or person indicated on the check

– NOW account—an interest-bearing checking account• Savings accounts

– Passbook savings account– Certificate of deposit (CD)—a document stating that a bank will pay

the depositor a guaranteed interest rate for money left on deposit for a specified period of time

• Short- and long-term loans– Line of credit—a short-term loan that is approved before the money

is actually needed– Revolving credit agreement—a guaranteed line of credit– Collateral—real estate or property pledged as security for a loan

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Traditional Services Provided by Financial Institutions (cont’d)

• Credit card and debit card transactions

– Banks and other financial institutions charge merchants fees (a percentage of each credit card transaction) for handling the transactions for the merchant

– Banks impose monthly finance charges on the unpaid balances (essentially, a line of consumer credit) of cardholders

– Debit card—a card that electronically subtracts the amount of a purchase from the cardholder’s bank account at the moment the purchase is made

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Typical Services Provided by Banks

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