Money and Currency

Money is a medium of exchange. All values in the economic system are measured in terms of money. It is anything that is accepted as a payment for goods or services. It may be pieces of gold or silver, sheets of printed paper (bills or GB notes), shells, stones, cattle, or anything else that is regarded as a legitimate basis of exchange for something else.

Money differs from cash. Cash is a form of money that consists of paper currency and coins. So, currency is money in use in a country. Currency is usually backed by gold and silver. National currency is «backed» by the store of gold which the government maintains (gold standard). Nowadays national currencies are considered to be as strong as the national economies which support them. For example, today our Ukrainian currency «hryvnia» (UAH) has value only because the Ukrainian government stands behind it.

The work of a bank centres around money and financial services. The immediate service offered by the bank is the receipt for deposit of coins, bills (notes), and checks and the cashing of checks, through current accounts. Coins and notes in circulation have the status of ’legal tender’, that is to say they must be taken in different payments.

But most money is not in the form of cash. It is in the form of demand deposits, which is money held in checking (GB current) accounts. Almost all businesses and most families keep the money they need to pay their bills in a bank checking account. Then, instead of cash, they use checks (GB cheques) to pay their bills. A check is a piece of paper that orders a bank to give the payee a specified amount of money. Checks, credit cards, and money orders are not legal tender. They perform the function of substitute money and are known as “instruments of credit”. A credit card gives you possibility to buy goods or services without using cash or a check.

Bank Accounts

There are two reasons for using bank accounts: convenience and safety in money use provided by a current account (US: checking account) at a bank; and small but regular interest that is provided by a deposit account (US: savings account) if you want to save your money for a long period of time.

The checking account is an account for receiving money from other people (wages and salary paid into the account or different amounts of money received from the customers). It is money that a customer deposits in order to use that money to write checks, so it is the account for paying your bills, rent, subscriptions and other expenses. If you keep your money in your checking account you can go shopping without having to carry cash around with you. When you want to make a payment you simply fill in the amount on a check and hand it together with your check card to the cashier in the shop.

A checking account holder can use all banking services. You can have money sent abroad, buy and sell stocks, place standing orders or authorize direct debits. And of course, you can apply for an overdraft or other loans. Checking accounts are called demand deposits, that is, a customer can withdraw the money without waiting for any period of time.

The savings account is the account for money that you do not need for day-to-day expenses and want to save it and to receive some interest. When you open your savings account you receive a passbook or savings book. Every deposit or withdrawal is entered into it by a teller. So you have a complete written record of all transactions with your account. The interest that your money earns is also recorded.

Any money put into your savings account begins earning interest from the day it was deposited. The interest rate can vary from time to time according to the market rate. You can pay money into your savings account at any branch of the bank.

There is a variety of a deposit account - time deposit (or certificate of deposit -CD) which allows customers to deposit larger amounts of money for a definite fixed term and earns a higher rate of interest. If you withdraw your money beforehand you will lose your interest rate.

Savings account is free of charge, it earns interest to its holder, so that makes it profitable for customers.

But checking account charges different fees for bookkeeping of the account, service charges for different transactions. Every month a checking account holder receives a monthly statement telling him exactly what has been debited or credited to his account. This statement lists all the checks that the bank paid and all deposits that the account holder made during the month. The bank usually sends the statements with the customer's cancelled checks (the check that the bank has already paid and recorded in the depositor's account. These checks are marked «paid»). The customer then compares the balance on the statement with the balance in his own records by subtracting the total of his outstanding checks (a check that the depositor has written but which has not yet been presented for payment or not yet been cashed).

There are other fees that the bank may collect from checking account holders:

- for a stop payment order: when a depositor decides that he doesn't want the bank to pay a payee, but he has already written a check to that person, he may give the bank a stop payment order. The bank will then refuse to pay this check, and charges the depositor a fee;

- banks also charge a depositor a fee when he is overdrawn. A depositor is overdrawn when he writes a check for more money then the balance in his account. The bank marks the check «in red», returns it, and charges a penalty for it.

There are new accounts - NOW and Super NOW accounts that offer their customers all the convenience of a checking account with the income advantages of a savings account.

6. Speak on the topics: Money and Currency; Bank Accounts.