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Sunday, June 16, 2024

What is a bank?

 A bank is an organization that can attract free funds of individuals and legal entities to deposits; issue funds to the population, legal entities on the terms of repayment, urgency and payment; open and maintain bank accounts of legal entities and individuals.

People have different attitudes towards banks. Part of the population is convinced that financial institutions are created in order to rob them. The second half believes that banks can provide them with real financial support in difficult times.

Let’s figure it out, and as far as possible, we will give examples so that readers are more comfortable with the perception of information.

Banks and individuals

Individuals (individuals) are clients of the bank. With the help of financial institutions, they carry out various operations and receive wages or pensions, social benefits on plastic cards.

Banks are needed so that individuals can:

  1. Earn passive income. If you keep your savings at home, they will only depreciate. Making a deposit in a bank will allow you to make a profit without doing anything. The interest is small, but it’s better than getting nothing. You can open different accounts: deposit, savings, savings. There will be interest on the rest of the money. However, banks can offer investments in mutual funds, precious metals and other products.
  2. Obtaining a consumer loan. Not everyone can have a large amount of free money. For large purchases, you can contact the bank, borrow funds and repay the debt in installments.
  3. Making transfers/payments. Individuals come to the bank branch, give the money, report the necessary data and that’s it. Subsequent processes are the concern of the bank.


1. You keep money at home, but inflation devalues it. You give them to a neighbor / relative / acquaintance who promises to return them after a certain time with high interest! But time passes, and nothing happens.

Instead, you can make a deposit in a bank and receive interest on the deposit. Having gained experience and received the first passive income, you can think about other means to protect your hard-earned money from depreciation.

2. Imagine that you want to buy a new car, and you have a small amount of money. Relatives and friends cannot help. You apply for a loan to the bank, make a down payment, already use the car and return the money to the bank in parts.

3. You borrowed from a relative, and it’s time to pay back the money. However, he lives far away, in another city. A trip to it is a travel expense. You can go to the bank in your city, provide the bank details of a relative and send money. Many banks offer online services. So, there is an opportunity to pay off the debt without leaving the threshold of your apartment.

Do not forget about online shopping. We are already accustomed to the fact that the product you like can be ordered in foreign stores. It is not possible to pay in cash here. So, you will need a bank card. Even in offline stores in your city, it is more convenient and profitable to pay by card than in cash. After all, many banks offer customers debit cards with cashback and other bonuses!

Now imagine that there are no banks. Will you be able to do what is listed above?

Banks and legal entities

An integral part of the business is bank service. Entrepreneurs and organizations open bank accounts in order to:

  • Keep money in their vaults. If necessary, you can withdraw the required amount at any time;
  • Conduct non-cash transactions. Payments between legal entities are documented. This allows you to prevent fraud on the part of counterparties and avoid the costs associated with the transportation of cash and their storage;
  • Accept non-cash payments from individual entrepreneurs. The majority of Russians already have bank cards, and can pay for purchases and services in a non-cash way. But for this, there must be an agreement on cash settlement services between the legal entity and the bank.

Current accounts opened by organizations in the bank also allow regulatory authorities (Pension Fund, Federal Tax Service, bank, etc.) to track the cash flow of companies.

As you can see, the benefits of banks are great. You just need to apply for loans wisely, apply for loans wisely, and calculate your financial capabilities so that later there are no problems with payments.

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