Commercial banks

These are the public or private banks which people use for their everyday money matters. If you have a bank account for example, it will be at a commercial bank.

There are three basic types of bank account:

* Current account. This type of account is used for everyday transactions such as paying bills, transferring money and drawing cheques. You can have an overdraft on this type of account (that means you can withdraw more money than you have in the account, although you will have to pay interest for this service), but you don't usually receive interest on the money you pay in.

* Deposit account. This type of account may be used for short-term, small savings; the money paid in earns a small amount of interest. It is not possible to draw cheques or have an overdraft on this type of account, but it is possible to transfer money to it from a current account.

* Investment account. Money paid into this type of account earns more interest, but the customer has to inform the bank in advance when he wants to with-draw his money. If it is a fixed-term account, he may not be able to withdraw the money for a certain period agreed with the bank (for example, five years). This type of account may be used for larger, long-term savings.

Another function of the commercial banks is to provide credit, in the form of:

Overdrafts, where the customer can take out more money than he has in his account up to a certain limit agreed with the bank. He has to pay the money back whenever requested by the bank, and he also has to pay a relatively high rate of interest whenever he is overdrawn. For this reason, an overdraft is not the best option for long-term borrowing.

A loan is cheaper if a large amount of money has to be borrowed over a longer period. It is usually taken out for one item such as a car or a house, and is repaid in monthly instalments along with a fixed rate of interest. A loan used to buy a house or land is called a mortgage.

Credit cards such as Visa or American Express are used to buy goods without needing to pay for them immediately. The customer receives a monthly statement and can either pay the entire amount in full (in which case no interest has to be paid) or in monthly instalments (plus a fixed rate of interest).

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