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Insurance
Investing
Loans
Mortgages
Mutual Funds
Real Estate
Reviews
Savings
Stocks
More...
Banks have been, and continue to be vital institutions when considering
taking greater control of your personal finances. Most banks provide a
range of services from ordinary savings to premium savings accounts;
basic checking to premium checking accounts; and short term loans to
mortgages. Many banks do not offer interest on their checking accounts,
but there are several banks that recognize the importance of provision of
interest on checking accounts and have begun to offer such services.
Before undertaking a financial transaction however, it is always helpful to
ask yourself the following question:
Will this transaction contribute to my assets or will it contribute to my
liabilities?
If a transaction contributes to your assets, then it means there is a net flow
of money into your savings account as a result of the transaction. The
decision to open an interest bearing savings account contributes to your
assets as there will be a net flow of cash into your existing savings
accounts. Many banks offer money market accounts that pay significantly
higher rates of return based o n prevailing rates of currency trade.
Conversely, if the transaction results in a net outflow of cash from your
accounts then you have incurred a liability. The decision to contract a loan
for purchase of goods or services contributes to your liabilities.
However, it is also possible that some financial decisions result in both
assets and liabilities. The decision to purchase a home has both an asset
and a liability side. On the asset side the buyer gradually gains ownership
of a property, building equity with every monthly payment made. On the
liability side the buyer has to pay a monthly premium for the property from
his wage income or other sources.
Therefore, decisions that ultimately lead to the ownership of property
increase assets.
taking greater control of your personal finances. Most banks provide a
range of services from ordinary savings to premium savings accounts;
basic checking to premium checking accounts; and short term loans to
mortgages. Many banks do not offer interest on their checking accounts,
but there are several banks that recognize the importance of provision of
interest on checking accounts and have begun to offer such services.
Before undertaking a financial transaction however, it is always helpful to
ask yourself the following question:
Will this transaction contribute to my assets or will it contribute to my
liabilities?
If a transaction contributes to your assets, then it means there is a net flow
of money into your savings account as a result of the transaction. The
decision to open an interest bearing savings account contributes to your
assets as there will be a net flow of cash into your existing savings
accounts. Many banks offer money market accounts that pay significantly
higher rates of return based o n prevailing rates of currency trade.
Conversely, if the transaction results in a net outflow of cash from your
accounts then you have incurred a liability. The decision to contract a loan
for purchase of goods or services contributes to your liabilities.
However, it is also possible that some financial decisions result in both
assets and liabilities. The decision to purchase a home has both an asset
and a liability side. On the asset side the buyer gradually gains ownership
of a property, building equity with every monthly payment made. On the
liability side the buyer has to pay a monthly premium for the property from
his wage income or other sources.
Therefore, decisions that ultimately lead to the ownership of property
increase assets.
Banking basics - assets versus liabilities
How do banks make a profit?
Like all other businesses, banks exist to make a profit. Banks profit by
charging interest on monies loaned to customers, while customers profit
when banks pay them interest on their savings accounts.
As such, deposit rates tend to be relatively low, while lending rates tend
to be relatively high. It is common to find banks that charge up to 15%
interest on personal short -term loans, but pay only about 5% on
premium savings accounts, while ordinary savings accounts earn even
less.
charging interest on monies loaned to customers, while customers profit
when banks pay them interest on their savings accounts.
As such, deposit rates tend to be relatively low, while lending rates tend
to be relatively high. It is common to find banks that charge up to 15%
interest on personal short -term loans, but pay only about 5% on
premium savings accounts, while ordinary savings accounts earn even
less.
Banks as a source of mortgage finance
Banks tend to be a good source for mortgage finance because a
mortgage builds a long-term relationship between the customer and the
bank. The bank can charge the customer a relatively low interest rate on
a mortgage, while charging a significantly higher interest rate on a
short-term loan.
mortgage builds a long-term relationship between the customer and the
bank. The bank can charge the customer a relatively low interest rate on
a mortgage, while charging a significantly higher interest rate on a
short-term loan.
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