The banking system of the US is a complicated one. It has been one of the oldest businesses in the US since the 1790s. The oldest bank, Bank of New York was established back in 1984 and is still functioning. Most US citizens indulge in banking activities regularly. The entire banking system is based on three services which are deposit security, privatized banking, and management of the assets. Therefore, understanding the working of this system is important to everyone living in the country and also for those moving to the US for a long stay.

Regulatory bodies

In most nations, a single body governs the entire banking system. In the US, 5 major agencies are regulating how banks around the country function. These regulating bodies are under the authority of both central and state administrations.

Federal Reserve System, Office of the Comptroller of Currency, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, and Office of Thrift Supervision together are accountable for protecting the financial order of the country. Prevention of frauds, cash laundering, funding terrorist groups, usury lending, and customer data leakage are some primary duties of these regulatory parties. They also promote providing money to the less privileged section of the population.

Various types of banks in the US

Banks in the US are of different types. The services vary from one to another. The following are the common banks that constitute the banking system of the US:

• Central banks
  These banks come under the central government and handle the finances of the country’s government. They also exercise control over all other banks in the country. The central banks also provide all common services one might see at other commercial or retail banks.
• Consumer/Personal Banks
  These are the most common banks used by the citizens of the country. Also, known as retail banks, the services of this type of bank are primarily for individual consumers rather than companies, corporations, or other banks. You can have savings account in a retail bank and deposit your money. Credit or debit cards and personal loans can be availed if needed.
• Commercial banks
  These are institutes of finance that offer their services on a higher level. Both individuals and business groups have dealings with commercial banks. A commercial bank is usually having branches all over the country. The focus of commercial banks is to serve the business sector rather than individual customers. They accept deposits, provide business and personal loans, and other investment products.
• Member-owned banks
  These banks are non-profit organizations where financial services are provided to the members only. The banks provide credit to the members at rates different from other banks. The member-owned banks are usually formed by people of similar professions, living in the same city.
• Online banks
  The banking system has revolutionized with the launch of online banks. These banks have no concrete buildings where you can visit. All facilities are administered over the internet. You can avail of services from anywhere and anytime.

Bank accounts

Bank accounts are of two types, checking and savings. For long-term deposits, a savings account is appropriate. Interest is earned over the long term. Some service fees will be applicable as well.

Checking accounts are for short-term use. Customers can make deposits and withdraw money as and when needed. It can be used for daily expenditures, bill payments, and other small expenses. You will receive a checkbook and a card once you open a checking account.

Working of Banks in the US

The way banks do business is almost the same for all the different types. The banks generate income from the money that customers deposit in their accounts. Most of this deposit money goes into serving the needs of other customers such as educational loans, property loans, business finances, and much more. The interest gained from the loans is how banks earn. However, this does not mean you lose control over any of your money. The bank provides facilities to every customer to withdraw an amount from what they have deposited. There are ATMs where one can withdraw a limited amount of money. For greater needs, a cheque can be written. You can also visit the bank in person and draw the amount you need.

The amount of loans that a bank can provide is regulated by the Federal Reserve. If they lend out more than they earn, the entire economy will fall. Therefore, control is needed. Also, only 90% of the deposit money can be taken by the bank for providing loans. The remaining should be left untouched in the customer account without any disturbance.

Popular Money Tools to Manage Finances

Money management is a crucial aspect of every individual’s life. We don’t want to run into debt at any point. Therefore, keeping track of all expenditures and savings is a necessity.

• YNAB
  You Need a Budget or YNAB is an excellent tool for managing the monthly budgets. It is found useful by people who live on a tight budget and have loans to clear. The tool helps you keep track of every expenditure you make throughout the month.
• Pennyminder
  It is a tool for families where multiple people are earning. The budget of the household can be managed in a single tool by all members. Everyone can see the expenditures made by other family members. It helps to keep a check on the money being spent in total.
• Personal Capital
  It is a free online tool where customers can manage their budgets as well as investments. The respective accounts can be linked with the tool. The spending is categorized by the tool for providing a clear perspective. It displays in form of graphs for a better understanding of the finances.
• Mint
  This tool can help you centralize control over all accounts, credit cards, investments, and much more. All your finances are tracked in one platform for convenience. Mint has a free website and also mobile apps. Graphs and charts are used to display information in a visually attractive way.