In simple words, a bank is a financial institution that enables you to deposit money, store money, withdraw it, and further also lend you money in the form of a loan. Banking forms a significant sector of every economy, and the banking system of a particular country offers a set of advantages to its customers. Let us look at the five benefits of banking through this blog.
5 Advantages of Banking
With banks, your money remains safe. Banks create digital accounts that credit money into your account whenever you or an external party deposits money into it. As a result, you do not have to take the risk of saving money in a home-based locker. Instead, depositing your money in a bank helps you keep your money secure.
2. Enables Savings
Keeping cash at home can result in unnecessary and uncontrolled expenses. However, depositing money in a bank helps you save money and use it when you require it, should you have as many funds in your account. Moreover, these days banks offer ATMs to withdraw cash and mobile applications to enable seamless and instant transfer funds.
3. Earn Interest on Savings
Banks offer a particular rate of interest on savings. So, it is an opportunity for you to earn something on your savings instead of risking and maintaining it in the form of cash in your traditional home-based locker.
4. Traditional Investment Options like FD and RD
Banks have been famous for offering investment options such as fixed deposits (FD) and recurring deposits (RD). Opening an FD requires you to deposit a particular amount in your account and keep it as is until maturity. On maturity, depending on the tenure of the deposit, you earn interest on it. You can choose to get a monthly interest or get the principal with interest on maturity, either paid to your savings account or get the FD auto-renewed.
On the other hand, in the case of an RD, you are required to pay a particular amount, say INR 5,000 every month, on a particular date to the RD account. In the case of manual banking, you have to pay it manually. However, in the case of e-banking, based on your standing instructions, the amount gets debited from your account automatically, or you have to manually credit it to the RD account on the specified date. On maturity, you get principal and interest credited to your account.
5. Apply for a Loan
This is another significant benefit of having banks in the financial ecosystem. Banks lend money in the form of a loan and charge a specific interest rate to the borrower. The borrower needs to repay the loan, along with interest, within the stipulated time frame. Banks offer various types of loans such as home loans, car loans, personal loans, etc., after careful consideration and evaluation of the applicant’s case and submitted documents.
We hope this article gave you good insights into the benefits of banking. At Arth Shikshan, we aim to grow FinTech awareness across every part of the country and provide a better understanding of it through various informative videos and blogs in different local languages of India. So, stay tuned with Arth Shikshan, and keep increasing your financial awareness with us.