What are banking instruments and there uses
Banks use various instruments to carry out their financial operations and services, customer may take benefits from them on time to time basis to meet there financial needs in a more safe and secure way.
Some of the common instruments used in include:
1. Deposit Accounts:
These include savings accounts, checking accounts, certificates of deposit (CDs), and various other types of deposit accounts where customers can store their money.
2. Loans and Credit:
Banks provide loans and credit facilities to individuals and businesses. Examples include personal loans, mortgages, business loans, and credit cards.
Customer’s have to pay back the loan amount to the bank on installment’s on monthly basis over agreed period of time e.g 3,5,7 or 10 years etc.
Customer’s also have the choice to payoff loan prior to its is maturity period . An important factor is to pay the loan payment timely so that customer can maintain a clear credit history as otherwise in case of late payment’s customer will be having issues in case he wishes to apply for any further loans in future from any bank.
3. ATM Cards and Debit Cards:
These cards allow customers to access their funds through ATMs and make purchases directly from their bank accounts.
Now a days customer can move cashless and have the convenience to use ATM cards/Debit card on there favorite retail outlet or online store to purchase the desired item they are interested in buying.
4. Credit Cards:
Credit cards enable customers to make purchases on credit and pay back the amount later, often with interest.
The best thing of credit card is that customer have the option to consume there allotted credit card limit to fulfill there needs and then pay bank within specified time. Customer don’t have to pay any interest if entire consumed amount is paid to the desired bank over a stipulated time period.
Credit card is a very handy thing specially at the time of any urgent payment since you may fulfill your need and pay bank later. The key element is to use it wisely and make sure consumed amount is paid before the due date to avoid late payment charges thereby ensuring to maintain clean credit history.
5. Cheques:
Customers can write Cheques to transfer money from their accounts to others. This is a common way to pay bills or make payments.
6. Online Banking:
Internet banking platforms and mobile apps allow customers to manage their accounts, transfer funds, and pay bills electronically.
7. Wire Transfers:
Wire Transfers are used for transferring money between banks, domestically and internationally.
8. Money Orders:
A money order is a prepaid instrument that is often used for secure payment in place of a personal cheques.
9. Bank Drafts:
Bank Drafts /Cashier’s cheques, are issued by banks and are a guaranteed form of payment because they are drawn against the bank’s funds.
10. Savings Bonds:
Savings Bonds are government-issued debt securities that individuals can purchase through banks as a way to save money.
11. Electronic Funds Transfer (EFT):
This includes various electronic methods for transferring funds, such as ACH (Automated Clearing House) transfers and direct deposits.
12. Bank Guarantees and Letters of Credit:
These are used in trade and business transactions to ensure payment or performance of a contract. Both these instruments are widely used for all those businessperson involved in import and export business
13. Safe Deposit Boxes:
Banks offer safe deposit boxes for customers to store valuable items and documents securely.
14. Overdraft Protection:
An arrangement that allows customers to overdraw their accounts up to a certain limit, often with associated fees.
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Conclusion:
These banking instruments help banks to provide a wide range of financial services and facilitate transactions for their customers since each of them are of great importance and used on daily basis as per customer’s need.
