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A bank account is a financial account maintained by a bank or other financial institution in which the
financial transaction A financial transaction is an agreement Agreement may refer to: Agreements between people and organizations * Gentlemen's agreement, not enforceable by law * Trade agreement, between countries * Consensus, a decision-making process * Contract, ...
s between the bank and a customer are recorded. Each financial institution sets the terms and conditions for each type of account it offers, which are classified in commonly understood types, such as
deposit account A deposit account is a bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transaction A financial transaction is an Contract, agreement, or communication, carried o ...
s,
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accounts, current accounts, loan accounts or many other types of account. A customer may have more than one account. Once an account is opened, funds entrusted by the customer to the financial institution on deposit are recorded in the account designated by the customer. Funds can be withdrawn from loan loaders. The financial transactions which have occurred on a bank account within a given period of time are reported to the customer on a
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, and the balance of the accounts of a customer at any point in time is their financial position with the institution.


Nature of a bank account

In most legal systems, a deposit of funds in a bank is not a
bailment Bailment is a legal relationship in common law In law, common law (also known as judicial precedent or judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written op ...

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- that is, the actual funds deposited by a person in a bank cease to be the property of the depositor and become the property of the bank. The depositor acquires a claim against the bank for the sum deposited but not to the actual cash handed over to the bank. In accounting terms, the bank creates (“opens”) an account in the name of the depositor or a name directed by the depositor in which the amount received by it is recorded as a transaction. The
deposit account A deposit account is a bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transaction A financial transaction is an Contract, agreement, or communication, carried o ...
is a ''liability'' of the bank and an ''asset'' of the depositor (the account holder). On the other hand, a bank can lend some or all of the money it has on deposit to a third party/s. Such accounts, generally called loan or credit accounts, are subject to similar but reverse principles of a deposit account. In accounting terms, a loan account is an ''asset'' of the bank and a ''liability'' of the borrower. Loan accounts may be unsecured or secured by the borrower, and they may be
guarantee Guarantee is a legal term more comprehensive and of higher import than either warranty or "security". It most commonly designates a private transaction by means of which one person, to obtain some trust, confidence or credit for another, engages ...
d by a third person, with or without security. Each financial institution sets the terms and conditions for each type of account it offers, and when a customer applies for the opening of an account, and accepted by the institution, they form the contract between the financial institution and the customer in relation to the account. The laws of each country specify how bank accounts may be opened and operated. They may specify who may open an account, for example, how the signatories can identify themselves, deposit, withdrawal limits among other specifications. The minimum age for opening a bank account is most commonly 18 years of age. However, in some countries, the minimum age to open a bank account can be 16 years, and accounts may be opened in the name of minors but operated by their parent or guardian. In general, it is unlawful to open an account in a false name.


Account structure

From the customer’s point of view, bank accounts may have a positive, or ''
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'' balance, when the financial institution owes money to the customer; or a negative, or ''
debit Debits and credits in double entry bookkeeping are entries made in account ledger A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward balance Balance may refe ...
'' balance, when the customer owes the financial institution money. Broadly, accounts that hold credit balances are referred to as
deposit account A deposit account is a bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transaction A financial transaction is an Contract, agreement, or communication, carried o ...
s, and accounts opened to hold debit balances are referred to as
loan account In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that debt ...
s. Some accounts can switch between credit and debit balances. Some accounts are categorized by the function rather than nature of the balance they hold, such as
savings account A savings account is a bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transaction A financial transaction is an Contract, agreement, or communication, carried ...
, which routinely are in credit. Financial institutions have an account numbering scheme to identify each account, which is important as a customer may have multiple accounts.


Types of accounts

Each financial institution has its own names for the various accounts it offers to customers, but these can be categorised as:


See also


References

{{DEFAULTSORT:Bank Account Bank account Banking