Banks

(The weekly series - Pocket Money - where I explain financial basics in fewer than 200 words. Feel free to make suggestions!)

A bank is a financial institution which looks after your money and provides financial services. 

There are: high street banks, online banks (sometimes known as ‘challenger banks’ because they have disrupted the way that the traditional system worked) and investment banks. There’s also the NS&I bank and the Bank of England which is the bank of the government and has a role in the financial stability of the country. 

Banks might: 

• Hold your money safely in accounts (current accounts or savings accounts etc).

• Pay interest on your savings.

• Lend money to people and businesses (loans, mortgages and credit cards etc.).

• Charge interest on the money they lend.

• Facilitate payments between people and businesses.

• Offer other services like currency exchange or financial advice. 

They make money through investment and also the difference between the interest that they charge borrowers and the interest that they pay to savers. 

In the UK, they are heavily regulated because they are so important to the economy. Your money is protected up to £120,000 per person, per institution through the Financial Services Compensation Scheme (FSCS), so if the bank fails then your money is safe up to that limit.

Love Eleanor. xxx