13. Forms of money.

Everybody knows that there exist several forms of money. But few people can name them. I’ll try to encompass all of them to you.

In the United States most money is in the form of checking accounts. A checking account is a bank account in which money has been deposited. A withdrawal can be made at any time using a check. Check is a written order to a bank to pay a certain amount of money to the person or business to whom the check is made. Depositing $100 in a bank checking account increases the sum the depositor can draw on by that amount. From then on, the depositor need not have $100 in paper bills or coin in order to buy something worth $100. Simply writing a check will cover the cost. By the way, checking accounts are also known as demand deposits, because their owners have the right to demand them from the bank whenever they wish.

Sometimes time deposits are considered a form of money. A time deposit is a bank deposit that can be withdrawn at a certain time in the future, or on advance notice. Time deposits cannot be withdrawn using a check. I can add that a savings account is an example of a time deposit. When savings accounts are used as a store of value, savers deposit their money for use in the future instead of in the present. The bank book is a record of a person’s deposits and percentage the bank paid for use of the money.

Now I would like to come back to checks. It’s common knowledge that almost all firms use checks to pay their accounts, and most people also are paid by check. But that does not mean that checks are substitutes of money. Checks are more convenient and safe to use than currency. They are flexible in that they can be written for any amount. They provide a legal record of financial transactions. However, although most people and institutions accept them, checks are not legal tenders. Legal tender is money that, by law, must be accepted in payments of debts. So, on balance, the only legal tender in the United States is currency. Just as a matter of interest I’d like to stress that several other things are used like money. Credit cards are a common way to purchase goods and services. If the card is used to buy gasoline, the gas station will record the name and number and send it, along with the bill for the gasoline, to the credit card company. The credit card company will then pay the gas station and send the buyer a bill for the amount of the gasoline. Credit cards are not money, though, since they can be traded only for certain products from certain companies. As for money, it can be exchanged for anything.

14. Types of bank accounts.

People may have three basic types of bank account:

1. current account is the most popular one which is used for handling day-to-day finances. It is used for everyday transactions such as paying bills, transferring money and drawing cheques. Though the current account holder doesn’t usually receive any interest on the money he pays in this type of account has some advantages. Firstly, it enables people to hold their money in a safe place. Secondly, this type of account allows people to withdraw their money at any time. Thirdly, it provides people with a cheque book so that they don’t have to carry much cash.

When a person intends to open a current account he should see the branch manager who wants to get the necessary background information about the applicant. As a rule, the banking officer wants to know the applicant’s occupation and place of work. Probably he will want to have a reference from the applicant’s employer. Then after the interview if the manager is satisfied with the applicant’s status he will approve the application, arrange for the applicant to be given a cheque book and arrange for a monthly statement to be sent to the account holder.

The current account holder can have an overdraft on this type of account, i.e. he can withdraw more money than he has in the account.

2. deposit account is another popular account which is really designed for saving money and may be used for short-term, small savings. The money paid into this type of account earns a small amount of interest. The customer receives no cheque book and therefore he cannot pay bills so easily as with the current account. Though it is not possible to draw cheques or have an overdraft on this type of account, it has some advantages over a current account. Firstly, it is easier to open a deposit account than a current account because there is no need to have an interview with the branch manager. A client only has to fill in a form and deposit the minimum amount of money required by the bank. Then the client is provided with a pass book. It is necessary to bring it to the bank every time the client wishes to withdraw or deposit money as the pass book is the client’s record of the account. Secondly, a deposit account earns for the account holder. It occurs because the bank invests the money that the depositor pays in and in return the bank pays the client interest.

But the client should remember that if he wants to take his money out of the deposit account he mustn’t forget to give a bank a week’s notice. If the client wants his money immediately, he loses some interest.

3. investment account may be used for larger, long-term savings. Money paid into this type of account usually earns more interest, but the customer can’t get his money immediately. He has to inform the bank in advance when he wishes to withdraw the money. The customer may have a fixed-term account. In this case the account holder may not be able to withdraw the money for a certain period agreed with the bank, for instance, 3-5 years.