Banking refers to all the activities carried out by financial institutions involving money. This financial institutions include: central bank, commercial banks and non-banking financial institutions e.g. industrial and commercial development corporation (I.C.D.C). Some important terms used in in banking.
Bank statements: This is a list of all transactions made by the bank with or on behalf of the customers of the account holder. It is issued at the end of each month to current account holders. It enlists all deposits made by the account holder, all cheques paid by the bank out of his account holder, all cheques paid by the bank out of his account and any charges made by the bank.
Credit transfers: This is the process where an account holder draws a cheque carrying a wholesome amount to be paid to various people and attaches it to a list of names of the people to be paid. The cheques and the list are presented to the bank and the bank takes up the responsibility of transferring payments to payees who must be account holders.
Standing orders: it is an arrangement between the account holder and his bank to pay a specific amount to a named party at a regular or specific intervals for a given period of time until the agreement is cancelled by the drawer. The system serves best in payment of salaries, rent and rates insurances. A fee is charged by the bank for these services.
Traveler’s cheque: Issued to a person after paying for them in advance they are in fixed denominations. It is important to businessmen always on transit.
Credit cards: mainly issued by banks. It gives authority to the holder to buy goods and services up to an agreed amount. The selling party then presents the card to the issuing organization for payment.
Cheque guaranteed card: it’s issued by banks to reliable current accounts. The guarantee card if attached to a personal cheque it guarantees payment against the personal cheque. In other wards it cannot be dishonored.
Clearing house: it’s a central place where different banks meets to settle amounts that become payable to each other as a result of their clients transactions. The transfer of payments is done by the central bank since it holds all commercial banks accounts.