The banking industry is one where consumers interact every day. They provide access to accounts, credit and debit cards, loans, wealth management services, insurance, and business banking. Banks provide a safe place for consumers and business owners to store their cash and be used as a source of loans for personal and business ventures The U.S. banking industry includes around 92,000 establishments with an average annual revenue of $465 billion.1
There are three different types of accounts that are commonly seen at banks: savings, checking, and certificate of deposit (CDs). Savings accounts allow customers to deposit money that they do not need right away but can easily withdraw. Banks will loan out money from savings accounts to borrowers and will charge interest based on the amount that is loaned to make money.
Checking accounts allow customers to deposit money with ease and can be used for financial transactions like paying bills. Accessing the funds in the account can be done by writing a check, using a debit card for payments or withdrawal, or by setting up automatic payments to different accounts. CDs are an account that holds a fixed amount of money for a period of time (six months, one year, two years) and pays an interest rate on the amount held in the account.
To ensure that a customer’s money is safe in the bank, an independent agency called the Federal Deposit Insurance Corporation (FDIC) was created by Congress to maintain stability and public confidence in the U.S. financial system. The FDIC also insures a customer’s money up to $250,000 per depositor, per insured bank, for each account ownership category.2 A customer does not need to purchase this insurance, as they are automatically covered if they open a deposit with an FDIC-insured bank.
First State holds a significant position in the SPDR Financials Sector (XLF). For a free consultation with experienced financial advisors, contact First State Investment Advisors at (918) 492-1361.
Sources
1First Research Industry Profile: Banks and Credit Unions (Accessed May 25, 2023)
2Investopedia: How Banking Works, Types of Banks, and How to Choose the Best Bank for You (Accessed May 25, 2023)
This overview is for informational purposes only and is not a recommendation. It should not be the sole deciding factor in making an investment. Investing is a risk and, as with all risks, a positive return is not guaranteed. Past performance does not indicate future results.