Business Proposal to the Bank for New Strategies of Generating Money
Banks make money in several ways; this is the reason that they have banking license from the regulatory authorities to legally receive deposits and grant loans to their clients. Most banks generate income through offering loans to their customers. Nowadays, there are many services that modern banks offer to their existing and new clientele. Before, bank just a place for keeping people’s money, but, as the time evolves, this turned into a financial institution that offers diverse financial products and services to wide based clientele. To begin with, Checking accounts are just a front liner of the services. There are also ATM services and debit cards, which offer low or no maintaining balances. In addition, there is a direct deposit and various overdraft protection systems for individual needs of the clients. Banks, too, serve as the custodians of all the retirees, by opening Individual Retirement Account. What else..? Bank also operates useful fiduciary services to clients, as acting trustee. And, at modern times, the most income-generated service that many banks have is the widespread of ATM machines in local places and abroad. All these ATM networks successfully provide convenient cash access to billions of people in the world.
Banks are just the same with other industries. It just happens that their product is in the form of money, loans, and Certificates of Deposits among other financial products. Certificates of Deposits or CDs are almost the same with any loan. Except for one thing, you are being paid by the bank, for letting it uses your money, to loan to other people. Certificates of Deposit or CDs potentially gives banks higher returns of investment. Banks mainly generate revenue on the interest they charge on loans, which is higher than the interest they pay on depositors’ accounts. Generally, there are many ways on how banks earn income from banking business, usually; they charge their borrowers for both borrowed money and money which is available to lend to their clients. Aside from that, banks, too, have short-term loans that also provide the banking sector a generating income. In providing loans to their borrowers, banks typically put a higher interest rate to cover the riskier factor that might happen along the way. This is the reason that the larger the loan, the higher the interest rate banks charge to the borrowers. In the same manner, banks, charge fees for each service they render on checking account, ATM account and access, as well as in the processing of overdraft protection. More than that, there are also investments and securities, which provide banks financial security to keep going on the banking business.
Foremost, many banks, earn great income from automated teller machines or ATMs. Withdrawing cash from ATMs is not part of your bank’s network. The earning is actually an out-of-network fee that goes up to $ 2.50. Plus, the bank owner of the ATM still charges a fee for the use of the equipment, for $ 2.50 or higher. Another way that banks generate money is through various fees they charge to their clients for the services they rendered to them. And, the most major income they get is from the invested funds. All the income generated from loans along with the other fee income is primarily used by banks to meet their expenses on building rental, salary of the employees and other operating expenses. Moreover, for those accounts that have inadequate maintaining balance, the bank charges $20 to $35 per transaction. And, among the latest generating-income transaction that banks have is the courtesy over draft. This is a check coming to your account, which does not have enough fund to pay it. In return, the bank will honor the check, but charge you an amount of shouldering the corresponding amount. On the other hand, savings account is a wide-range product, from simple children’s savings accounts, and passbook accounts to money market and bonds. Some banking business, like deposits or withdrawals can be done from your car by using the drive thru services. However, there is a cash management services offered to corporations and businesses that easier to avail and has less expensive fees. They include the bill payment, automatic clearing house items or ACH electronic funds. Likewise, there is also a more cash advance management services such as lock boxes and treasury sweep accounts that allow banks to earn larger amount of money from the clients’ funds. These are only some of the bank strategies used by many banks in the world to generate great income in the banking sector.