Copyright © Cengage Learning. All rights reserved Traditional Services Provided by Financial Institutions Checking accounts –Check—a written order for a bank or other financial institution to pay a stated dollar amount to the business or person indicated on the check –NOW account—an interest-bearing checking account Savings accounts –Passbook savings account –Certificate of deposit (CD)—a document stating that a bank will pay the depositor a guaranteed interest rate for money left on deposit for a specified period of time Short- and long-term loans –Line of credit—a short-term loan that is approved before the money is actually needed –Revolving credit agreement—a guaranteed line of credit –Collateral—real estate or property pledged as security for a loan 18 | 1

Copyright © Cengage Learning. All rights reserved Traditional Services Provided by Financial Institutions (cont’d) Credit card and debit card transactions –Banks and other financial institutions charge merchants fees (a percentage of each credit card transaction) for handling the transactions for the merchant –Banks impose monthly finance charges on the unpaid balances (essentially, a line of consumer credit) of cardholders –Debit card—a card that electronically subtracts the amount of a purchase from the cardholder’s bank account at the moment the purchase is made 18 | 2

Copyright © Cengage Learning. All rights reserved Typical Services Provided by Banks 18 | 3