Financial institutions exist in many different forms, one of which is the bank. Banks generally lend money to clients for all sorts of purposes including buying a house, investing in a business, home renovations, attending college and many other perfectly justifiable reasons.
Banks obtain funds to loan out by collecting deposits from individuals who, in return for a specified rate of interest, agree to leave their funds on deposit with the bank until further notice. In order for banks to operate successfully, they must generate what the industry commonly refers to as a spread: the difference between what they make on the funds they loan out and what they pay out to customers on their deposits. Given the profits of banks, it's safe to say the system works effectively.
Banks in recent years have become much more than deposit takers. They operate all kinds of businesses beyond the traditional, including investment banking, credit cards, small business lending and retirement planning. Not only do they offer more products and services, they do so in virtually every part of the world. American banking has never been so competitive despite the consolidation that has been taking place in recent years.
Some of the leading banks in the United States include the Bank of America, Chase Morgan, CitiGroup, Wachovia and Harris Bank. If you don't deal with a large financial institution, you do have the option of turning to your local credit union instead.
Banks, while often misunderstood by the average person, can play a large, positive role in your future financial health and wealth. First, consider that they provide a large portion of the funds necessary to own your own home, an otherwise unattainable goal. They take millions of risks each day to finance your dreams. Without banks, your money would slowly turn to dust. Instead, they invest in other people's dreams, keeping the economic system alive and well. Further, banking has created an incredible number of jobs in the industry itself, as well as those industries that feed off it. Without banking, our economy would experience chaos. They keep money moving.