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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, or communication, carried out between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals. The buyer and selle ...
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 maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained below. Tr ...
s,
credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's promise to the card issuer to pay them for the amounts plus the other agreed charges. The ...
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 Funds can be withdrawn from loan loaders.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
bank statement 300px, Example of a checking account statement for a fictional bank. A bank statement is an official summary of financial transactions occurring within a given period for each bank account held by a person or business with a financial institution. ...
, 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, where the owner transfers physical possession of personal property ("chattel") for a time, but retains ownership. The owner giving up custody is the "bailor" and person who takes is "bailee". The ba ...
- 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 Transaction or transactional may refer to: Commerce *Financial transaction, an agreement, communication, or movement carried out between a buyer and a seller to exchange an asset for payment *Debits and credits in a Double-entry bookkeeping syste ...
. The
deposit account A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained below. Tr ...
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 to ...
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 ''
credit px, Domestic credit to private sector in 2005 Credit (from Latin ''credit'', "''(he/she/it)'' believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party ...
'' balance, when the financial institution owes money to the customer; or a negative, or ''
debit In double entry bookkeeping, debits and credits are entries made in account ledgers to record changes in value resulting from business transactions. A debit entry in an account represents a transfer of value ''to'' that account, and a credit entr ...
'' 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 maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained below. Tr ...
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 at a retail bank. Common features include a limited number of withdrawals, a lack of cheque and linked debit card facilities, limited transfer options, and the inability to be overdrawn. Traditionally, transact ...
, 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