Making loans.

Providing a means of payment.

Providing a means of payment. People who have money in a bank checking account can pay bills by sim­ply writing a check and mailing it. A check is a safe method of payment, and the canceled check provides written proof that payment was made.

Banks also offer an order of withdrawal ac­counts, usually called NOW accounts. Like a savings ac­count, a NOW account pays interest. But the depositor can transfer funds to someone else by writing a negotia­ble order of withdrawal, which is like a check.

Many banks also offer credit cards as a means of pay­ment. People can pay for their purchases at stores and other establishments by using the cards to charge sums up to an amount determined by the bank. They then write one monthly check to the bank to cover their ex­penses. The bills are paid directly by the bank.

Words you may need:

bill - счет

cancel - отменять

proof – подтверждение

withdrawal – снятие (денег)

order -распоряжение

store - запас

ex­pense – затрата, расход

 

 

 

 

Making loans. Banks receive money from people who do not need it at the moment and lend it to those who do. For example, a couple may want to buy a 75,000 house but have only $15,000 in savings. If one or both of them have a good job and seem likely to repay the loan, a bank may lend them the $60,000 they need. To make the loan, the bank uses money that many other people have deposited.

The major obligation of a bank is to give depositors their money when they want it. But no bank keeps enough cash on hand to meet its depositors' claims if they all demand their money on the same day. Banks know from experience that such heavy withdrawals, called runs, rarely occur. If people are confident that they can get their money back, they will leave it at the bank until they need it. As a result, banks can safely loan or invest a large percentage of the funds deposited with them. In most countries, the government specifies the percentage of a bank's funds that can be used for loans.

The government also sets a percentage—from 3 to 22 ■ per cent in the United States—that must be kept on re­serve for possible withdrawals.

Like all businesses, banks try to make a profit. They do so by borrowing money from their depositors at one rate of interest and lending the funds at a higher rate. Banks use some of their income from loans to pay sala­ries, other operating expenses, and interest on deposits. The remaining money is their profit.

Words you may need:

savings - сбережения

use - пользоваться

experience - опыт

claim - претензия

percentage - процент

sala­ry- заработная плата (служащего)

interest - процент