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Banks offer a wide of accounts.
We shall examine the following:
Passbook savings account
Statement savings account
Cheque accounts

Passbook Savings Account

Passbook Savings Account
Most people are familiar with a passbook
savings account. Even in primary school
most students have had accounts at local
banks in which they deposited pocket
money, gifts of money and money from
casual work. These accounts are meant to
help a customer save money.
Traditionally, they have paid a
relatively low rate of interest, although
some banks have recently lifted their
interest rates to attract deposits.

Depositing Money
Depositing Money
Money is placed (deposited) in the
account using a deposit or credit slip.
You have received a $50 note as a
present and wish to deposit it in your
passbook savings account. Fill out the
deposit slip below, using a date from
last week. The transaction will be
recorded in the banks computer, and a
copy of the transaction will be printed
in your passbook.

Withdrawing Money
Withdrawing Money
Money is taken out (withdrawn) from the
account using a withdrawal or debit slip.
Something these accounts are called at
call accounts, meaning that you can
withdraw your money whenever you wish
without giving the bank prior notice
Today you have decided that you need $16
for a new record album. You get to the bank
before closing time and fill out a
withdrawal form. Complete the form below
with the correct details.

Statement Savings Account

Most banks have introduced a statement
savings account which operates in a
similar way to the passbook savings
account, but without the use of the
passbook. Customers are provided with
a book of deposit slips, a record book
and a plastic card that allows money
to be deposited and withdrawn through
an Automatic Teller Machine (ATM).
This card can also be used to pay a
shopkeeper and withdrawn cash through
the electronic funds transfer/point of
sale system (EFT/POS).

Cheque Account
Many business and consumers operate cheque
accounts. Some banks pay interest on the
amount deposited in cheque accounts. They
may, however, also charge a fee for the
service of providing a cheque account to a
A Cheque is basically an order from the
drawer (the person or business who has the
cheque account) to the drawee (the drawers
bank), instructing the drawee to take some
money out of the drawers account, and give
it to the payee (the person receiving the
payment). The cheque form is a quick and
convenient way to write the instruction.

Stop Payment
Stop Payment
If a cheque has gone astray it is
possible to prevent the transfer of
the money. It is important to
notify the bank as soon as possible
if you wish to stop payment on a
cheque. The bank will require the
details from your account recorddate, cheque number; amount and

Individuals borrow for many things, such as
the purchase of a house or a vehicle, or to
help finance an overseas trip or for a
whole range of consumer items.
Business, whether they are owned by one
person (such as a sole trader), several
person (such as partnerships and small
companies) or many people (such as larger
companies), also borrow money for all sorts
of reasons. A business may not have
sufficient funds to meet its day-to-day
needs, or it may wish to expand and
requires additional finance to purchase new
equipment or premises.

There are many financial
institutions that lend money:
Building Societies
Credit Unions
Finance Companies
Life Insurance Companies
Merchant Banks

Banks are the major lenders of money. In their
lending operations, banks lend money in a
number of ways and for a variety of purpose.
Lending to Individuals
Housing Loans:
Banks are the main source of housing finance
in Australia. A person obtaining a housing
loan must meet certain qualifying conditions
set by the bank (these vary from bank to
bank). The terms and conditions of bank
housing loans depend also upon the financial
circumstances of the borrower. Since large
amounts of money are borrowed, the repayment
time of the loan can extend over a long period
of time, generally twenty years.

Lending to business
Overdrafts are an important form of
trading bank lending. They enable
customers to overdraw (go beyond a
zero balance) their cheque accounts to
a limit agreed to in advance by their
bank. Deposits can be made to the
account at any time to reduce the
overdraft. This type of facility is
used most of all by a business in
times when cash coming into the
business is low but expenses still
have to be paid. When the account is
in overdraft, interest is charged on
the daily balance outstanding

Personal Finance:
Personal Finance:
Personal loans are approved by
banks for any worthwhile
purpose. Common examples are for
house extensions, the purchase
of a car; or for a holiday. The
loan plus interest must be paid
back over an agreed period of

Personal Finance:
Personal loans are approved by
banks for any worthwhile
purpose. Common examples are
for house extensions, the
purchase of a car; or for a
holiday. The loan plus interest
must be paid back over an
agreed period of time.

Fully Drawn Advance:

Trading banks provide loans to
business for a medium term as a
fully drawn advance. The
borrower is lent an agreed
amount of money, to be repaid
in regular installments over
the period of the loan.

Credit Card
Credit Card
Credit card enable the holder to Purchase of goods and services from the many
business displaying credit card signs.
Interest is payable if the repayment takes
place beyond a specified period of time.
Obtain cash advances from branches of banks
which are members of the credit card scheme.
A cash advance is a type of loan, where the
bank lends money to the cardholder, to be
repaid with interest in the future.
Bankcard, MasterCard and Visa card are the
credit cards offered by banks. American
Express and Diners Club operate in a similar

Farm development loans:

Farm development loans:
Trading banks provide medium to
long term loans specifically
for farmers to buy such items
as land and farm equipment. The
loans are paid back in regular
installments, plus interest,
over the agreed term.

Bridging loans:
Bridging loans:
Trading banks provide bridging
loans mainly to business and
industry, although this type of
finance is sometimes used by
individuals when purchasing houses.
Under these arrangements, the banks
provide temporary loans while the
borrower is awaiting further
finance from another source.

Banks provide lease finance for
major items of equipment, usually
to businesses. Under these
arrangements, the business chooses
the required equipment. The bank
then buys and lends this
equipment to the business in return
for regular payments until the item
is paid for in full.

Bill of exchange:
Bill of exchange:
Banks provide short term
financing to large business
corporations through the use of
bills of exchange. The bank
swaps money for the bill of
exchange and the business
agrees to buy back the bill at a
higher price at a later late.

Foreign currency loans:

These loans are used especially

by importers and exporters, as
they provide some guarantee of
the currency exchange rate that
they will receive in the future
for their goods or services.

Building Societies:
Building Societies:
Building Societies specialize in
lending to people who wish to
buy land and build a new home,
or to purchase and existing
home, or to extend their present
home. The provide long term, low
deposit housing finance.

Credit Unions
Credit unions are formed by groups of
people who pool their finance, for which
they receive interest. These funds are
then loaned to other members of the
credit union by way of borrowing.
Interest is charged on funds borrowed.
Credit unions are co-operative
organizations and people must become
members by buying shares if they wish to
borrow money. The members generally have
a common interest; for example, they may
all work in the same occupation.

Finance companies
Finance companies, some of them bankowned, provide a range of financial
services, including consumer credit.
Under consumer credit contracts, the
finance company provides loans which are
repaid over time, plus interest,
generally in equal installments. Finance
companies also provide finance under
hire purchase agreements where the
finance company owns the item financed
until it is fully paid for. Finance
companies also provide loans for
business purpose as well as lease

Life and Merchant Banks

Life insurance companies provide
personal loans and housing finance
to life insurance policyholders.
Merchant banks specialize in
providing services to large
business corporations. They provide
advice and finance on business
investment, company mergers and
takeovers, and international trade.

The name of a person purchasing a property
is printed on the back of the Certificate of
Title. This document shows the location and
size of the property and the ownership
details. As a security over the loan, the
bank will take a mortgage over the property.
When this happens the name of the bank is
also written on the back of the Certificate
of Title. The effect is that the property
owner cannot sell the property without the
approval of the bank. Generally, the bank
will only give this approval if it is paid
all of the money still owing at the time the
ownership changes.

You have been promoted to the
position of bank manager for the
ABA Bank. Part of your job is to
interview applicants for housing
loans to assess whether they should
be provided with finance. List five
factors you would consider when
deciding whether or not to approve
the loan.