What Is a Bank Product? From Accounts to Loans

Bank products are financial services offered by banks to help individuals and businesses manage money. They offer ways to save, spend, invest, and borrow funds. Banks offer diverse products for various financial needs, from daily transactions to long-term wealth.

Everyday Banking Accounts

Checking Accounts

Checking accounts are designed for frequent transactions. Users can deposit paychecks, withdraw cash, pay bills, and make purchases with a debit card or checks. They offer immediate access for managing income and expenses. Online and mobile banking are common for convenient management.

Savings Accounts

Savings accounts hold money for emergency funds or short-term goals. They earn interest, allowing funds to grow, though rates vary. While accessible, they often have transaction limits to encourage saving. Accounts at federally insured institutions are protected up to $250,000 per depositor.

Money Market Accounts

Money market accounts blend checking and savings features, often with higher interest rates than traditional savings. They offer check-writing and debit card access, providing more flexibility. However, they may require higher minimum balances and have transaction limits.

Lending and Credit Products

Personal Loans

Personal loans offer a lump sum for various purposes, like debt consolidation or home improvements. They are repaid over a fixed term with regular monthly payments of principal and interest. Many are unsecured (no collateral), but secured options exist. Terms, including interest rates and repayment periods, are set during application.

Mortgages

Mortgages are loans for purchasing real estate, like a home or land. The property serves as collateral, giving the lender a claim if payments are missed. Repayment periods are typically long (15 or 30 years), with payments divided into principal and interest. This allows property acquisition without paying the entire price upfront.

Auto Loans

Auto loans are secured loans for buying a vehicle. The car acts as collateral, reducing lender risk. If payments fail, the lender can repossess the vehicle. Secured auto loans often have competitive rates and larger amounts due to collateral.

Credit Cards

Credit cards are revolving lines of credit, allowing borrowing up to a set limit for purchases. Monthly statements detail transactions and amounts owed, with options to pay in full or make a minimum payment. Interest applies to outstanding balances not paid by the due date. They offer spending flexibility for various goods and services.

Long-Term Savings and Investment Options

Certificates of Deposit (CDs)

Certificates of Deposit (CDs) are time-deposit accounts holding money for a fixed period (months to years). CDs earn a fixed interest rate, typically higher than standard savings accounts. Funds are restricted until maturity, and early withdrawals may incur a penalty. CDs are considered a low-risk savings option.

Investment Accounts

Investment accounts, also known as brokerage accounts, allow buying and selling of investment assets. Assets include stocks (ownership in companies), bonds (loans to governments or corporations), and mutual funds or exchange-traded funds (ETFs). Unlike bank accounts, they involve market risk, meaning investment values can fluctuate. While not FDIC-insured, SIPC coverage protects securities up to $500,000 if the firm fails.

Retirement Accounts

Retirement accounts, such as Individual Retirement Arrangements (IRAs), allow saving for post-employment years. They often have tax advantages to encourage long-term savings. Traditional IRAs may offer tax-deductible contributions and tax-deferred growth, with taxes paid upon withdrawal. Roth IRAs are funded with after-tax dollars, allowing qualified withdrawals to be tax-free.