Checking Accounts and Bad Credit

If not being able to get loans and credit cards wasn’t enough, a bad credit rating can even be a barrier when it comes to acquiring a checking account. A checking account is a necessity these days as you simply cannot keep all the cash you have, on you all the time. Unfortunately, banks see people with a poor credit score to not be financially strong enough to even pay up on bank charges. They, of late, have been referring to the credit history of their applicants before granting them an account. The points described below need to be kept in mind while scouring for such an account.

Bank Charges

Few banks will be willing to allot you a checking account with checks, if you have a bad credit score, but the ones that do will surely try to make a bit more money off you. And they know that they can either biff you off and tell you to come back when you have an acceptable credit score, or use this opportunity to trap you with high charges for running your account. After all, since no one else is ready to offer you an account, they have a monopoly and can dictate terms with you.

Online Checking Account

This is another option worth exploring. Internet banking accounts generally ask for a lower credit score anyway, and can often brag about lower bank charges and transaction costs, as compared to physical accounts. They will, of course, ask you to maintain a minimum balance in your account all the time. This means you may or may not be able to avail the overdraft facility. Of course, it is always better to open an online checking account with a more reputed bank. They may charge a higher fee but you can rest assured knowing that your money is safe.

Investment Account

Of course, if you’re at a pretty low ebb with your credit score and the physical or online checking accounts are simply not coming your way, investment accounts may just be the last option you get to park your funds. The idea is a simple one. Investment accounts will require you to maintain a large minimum balance, but at least you don’t need to keep all your extra money lying around the house and you can give it to them for safekeeping instead.

Checking accounts really make managing money a lot simpler and hence, it is really important to have one. Now that you know the options at your disposal, you can go ahead and apply for one right away.

Purpose of a Bank Reconciliation Process

Bank reconciliation is the process of reconciling the bank statement balance, with the book bank account balance in the customer’s (client’s) books of accounts. The procedure should result in the tallying of the two balances, i.e., the adjusted bank balance calculated must equal the adjusted book bank balance figure. The process of preparing a reconciliation statement is a structured one, where bank reconciliation forms containing pre-printed items leave omission errors out. These forms are found on the back side of your monthly bank statement hard copies and make the process a whole lot easier. Read the following paragraphs to understand the purpose of a bank reconciliation process.

The purpose behind bank reconciliation is to identify and rectify divergences between the two bank balances. A divergence of the two balances can occur because of one of the following two things:

– Entries counted in the bank statement, not reflected in the account books.
– Entries made in the books of accounts, that are yet to be known to the bank.

Some entries that get missed out in the books of accounts are as follows:

– Bank charges and fees that are directly deducted from the bank’s side, are mostly only known by the business when the bank statement arrives.
– Bank’s collection of receivables, on the business’s behalf, does not get recorded in the books, till the actual bank intimation of receipt, arrives in the form of a bank statement.
– Any deposits made, directly in the bank account, without intimating the business, are recorded in the bank statement, but obviously not in the account books.
– Any interest earned on the bank balance is something that does not get calculated on the business’s side, and hence does not get recorded in the books till an official intimation arrives.
– Any errors from the bank side get noticed only after the arrival of a bank statement.

Some items that are recorded in the books of account, but are not reflected in the bank statements, are as follow:

– Outstanding checks that are yet to be encashed or settled from the bank’s side, i.e. checks that are still in transit, get recorded in the books but are only accepted by the bank once the settlement is done.
– Any bank errors, either positive or negative, sometimes get reflected in the accounts but not in the bank statement.
– Any deposits in transit that were recorded on the account books are only recorded in the bank statement once they are cleared

The Process

The reconciliation process starts with adjusting the balance as per bank. This is done by taking the actual balance given, adding the deposits in transit and the balance increasing bank errors, and deducting any outstanding checks and balance reducing bank errors. Then come the adjustment of balance as per the books of accounts. This is done by deducting the bank charges and fees (plus any other deductions) and any balance increasing accounting errors, and adding the interest earned, the bills receivables collected by bank and the balance reducing accounting errors. After the balances are individually adjusted, they are compared and expected to tally. Then the process shifts to journal entries. These are necessary to incorporate the necessary corrections in the books of accounts.

The Purpose

– Bank reconciliations prevent overspending by keeping strict accounts of cash outflows. They also check for any overcharging of fees, done on the bank’s side.
– They aid in the timely correction of bank errors. They also check duplication of transactions.
– They help in tracking and correcting employee errors. Regular bank reconciliations help in avoiding payment problems and delays due to insufficient balances.
– It puts an active check on the embezzlement of money and ensures responsible accounting.
– They help in reaching the correct account balance figures and this provides external auditors with easily verifiable documentation.
– If the process is done regularly, it can reduce accounting errors drastically and makes the finding of missing purchase and sales invoices, easy in the accounting system.
– They make it easy to identify whether the accounting errors are actual errors or errors of a timing mismatch.
– They make it possible to keep track of checks that are cashed, separate from those that are outstanding or in transit.

Basically, the purpose of bank reconciliations is to introduce efficiency and transparency into the business accounting systems. It is highly worthwhile to take time and do them, as it helps in avoiding situations like the one mentioned in the description. Nowadays, the bank reconciliation process can also be outsourced to specialist companies.

Mobile Banking Services

Mobile phones are basically communication devices that can be used for several other purposes, such as for executing financial or banking transactions. After internet banking, mobile banking has added another dimension to banking by enabling us to carry out any kind of transactions like payments, balance inquiry, and the transfer of funds, using our mobile phones.

Banking transactions over the mobile phone are usually performed either by sending an SMS message to the bank or by using mobile internet. When you send an SMS message requesting a financial transaction, it goes to the SMS center of your cellular service provider, and from there it travels to the bank’s system. You then receive the response that is sent by the bank via the service provider, all within a few seconds.

Doing Bank Transactions with Your Mobile Phones

Nowadays, banks have come up with a range services for reducing their cost of operation, while providing more easily accessible and faster services to the customers. You can use your mobile banking facilities to inquire the balance of your account, and request a statement or details of the last few transactions and the management of pension and insurance policies. In addition to these, you can request the bank to activate alerts, such as the minimum balance alert.

You can order or request a checkbook or card, and pay bills with the help of mobile banking. It has also made fund transfer (both national and international) quite simple and fast. It can give you the facility of carrying out cash deposition and withdrawals. Some other services include portfolio management services, personalized alerts, notifications on security prices, mobile recharging, etc. You can also receive online updates of stock prices, and perform stock trading as well.

There are generally two ways to classify mobile banking services. The first method classifies the banking services as ‘Push’ or ‘Pull’, depending on the originator of a service session. If the bank sends information as per the already agreed rules, then it is categorized as ‘Push’. An example of ‘Push’ is a minimum balance alert, which the bank sends whenever your balance goes below a particular amount.

On the other hand, when the bank sends information as a response to the request sent by a customer, it is termed as ‘Pull’. So, if you request the bank to send a statement for the last few, say 3 or 5 transactions, then it is a Pull-based service.

The second classification depends on the nature of the transactions. So, if you request the bank to send a bank statement, it is an inquiry-based service, while a request for fund transfer is classified as a transaction-based service.

These services are not only beneficial for the customers but for the banking institutions as well. These services can significantly lower the operating cost of banking institutions by reducing the dependence on costly call centers. They can also lower the frequency of errors that are usually committed in paper-based payments.

Mobile banking can considerably reduce the financial risks associated with starting a new business initiative. It can also enable banking institutions to closely monitor their new campaigns. Moreover, it can provide a new avenue for selling their products like insurance packages and other banking services.

It also helps the customers by ensuring fast processing of their banking transactions. As any kind of financial transactions are immediately reported to the customers, they can monitor and detect any error like an unauthorized transaction quite easily.

Today, the mobile and wireless market is one of the fastest growing markets in the world. However, a lack of trust and general awareness have been observed when it comes to mobile banking. Therefore, it is essential to address issues, like the security of the banking transactions that are executed from a distant place. It is equally important to ensure the security of the financial transactions if the device is stolen by hackers. The popularity of mobile banking can be increased by instilling a sense of trust among the customers by addressing the aforementioned security concerns.

Types of Bank Accounts

A bank account is a record of the financial transactions between the customer and the banking institution. The banking institutions have provided several types of accounts to cater to the needs of all sorts of individuals. One of the most important functions of banks is accepting deposits, which is aimed towards generating savings for the purpose of utilizing them in profitable investments. People, on the other hand, also prefer to deposit their savings in the banks, as they can earn interest and also avoid the danger of theft.

Though, the types of accounts offered can vary from one bank to another, here are some of the common bank accounts offered by commercial banks.

Checking Account

A checking account is also known as a current account or a transactional account. Money deposited in this type of account can be withdrawn at any time, as there in no restriction on the number of withdrawals and the amount of money withdrawn. Customers are generally given paper checks to carry out day-to-day transactions, like paying bills, making purchases, or transferring money to another account. ATM (Automated Teller Machine) facility is also provided to the customers. However, no interest is paid on the deposited money, and sometimes, customers have to pay a charge to the banks for rendering this service. This type of account is generally maintained by businessmen or concerns, as they have to make a number of financial transactions each day. A transactional account is sometimes called a demand deposit account, as no notice is required to withdraw money, i.e., money is available on demand.

Savings Account

Savings accounts are aimed towards mobilizing small savings from the general public. There are certain restrictions regarding the number of withdrawals and the amount to be withdrawn in a particular time period. However, money deposited in this account, earns a fair rate of interest. Though the customers can’t withdraw their money with checks, they can avail the ATM facility for the same. A passbook is also provided, which keeps track of all the financial transactions.

Money Market Account

A money market account is a type of deposit account, in which money can be deposited to earn a higher rate of interest than the savings account. However, a minimum balance is required to be maintained to earn interest and avoid fees. There is also a limit on the number of transactions that can be carried out in a particular month. The customers are usually allowed to make 6 withdrawals per month.

Certificate of Deposit

A certificate of deposit is also known as a time deposit or fixed deposit account. This account requires the customers to deposit a certain sum of money for a fixed time period. The money deposited in this account can’t be withdrawn before the date of maturity. However, some banks allow customers to withdraw money before maturity, by charging a penalty. The rate of interest paid on time deposits is usually higher than the other bank accounts. In addition to this, the interest paid on this account depends on the maturity period, i.e. longer the maturity period, the higher is the rate of interest paid.

Banking institutions offer several different accounts to satisfy the individual needs of their customers. These bank accounts enable the public to deposit their money in banks and thereby earn a monetary return.

Basics of Investment Banking

An investment bank is a type of financial intermediary that performs a variety of functions such as underwriting, facilitating mergers and acquisitions, or brokerage services for institutions. The work of an investment bank begins right from the counseling before the underwriting sessions, and stretches right till the securities are properly handled and distributed. These institutions play a very crucial role in market transactions on behalf of, or for private and public investors, governments, and corporations. There are some that also provide highly professional services in assisting their clients with industrial know-how on various parameters.

Industries from diverse sectors like media and telecommunications, real estate, industry, finance, health care, consumer products, and various such segments are provided assistance by investment banking services. Along with these, they also deal in the securities trading services, credit counseling, financial engineering, and merchant banking. The primary source of income for investment bankers is the commissions, fees, and gain margins on transactions provided for the above mentioned institutions.

The role of an investment bank as a mediator is to directly familiarize the nature of the investment and the entity being invested in. In case of conventional banking, people deposit finances in the form of cash, assets, and so on with a bank. The bank in turn can lend to a borrower under some standard norms to utilize it in his own way. In the case of investment banking, there is a direct familiarization of both the investor and the borrower. This means that an individual or institutional investor has an option to choose his type or division of investment into any given entity looking out for funds.

Investment banks provide companies with expert guidance and formulate strategies on their behalf for disinvestment, and also to merge or acquire new entities. Good investment banking involves procedures to maintain and upgrade the quality of services and keep a close watch on the emerging trends in the market, where their customer’s money can be invested. It also incorporates risk management services in order to streamline the flow of capital, check its overuse, and come up with a detailed analysis of credit risks.

A big firm should ensure a number of parameters before tying up with an investment bank, in order to ensure sizable profits. The bank should have a long-standing reputation of providing quality and consistent service. It should be accountable for all the transactions done through it. You need to do a thorough market research, compare and contrast the functioning styles of different banks, the consistency of their workforce in staying with a particular deal, or the reputation of their previous clients.

The investment banking market was increasing leaps and bounds, until the recession struck. Banks all over the world are trying to recoup the losses. The US is the biggest market, followed by Europe, Middle East, Africa, and Asia. Its global hubs are a few economically sound centers like London, New York, and Tokyo. However, it is not restricted in its scope to a few regions of the world. It caters to a global community, which makes it highly sensitive to global ups and downs, along with innovative fluctuations. A career as an investment adviser is both a challenging and a highly rewarding career option.

Before Buying a Banking Software

Banking software is sort of a vague term, actually. This is because there are a variety of them available in the market. The only difference is who they are made for―that is―their targeted user base. Thus, it is evident that this will change all the dynamics of the software. There would, therefore, be 2 types of banking software, one for individual users, and the other for banks themselves to use. And of course, one must not forget online banking software, which is becoming increasingly popular. So, let us look at the various basic features which banking software must ideally have, depending upon the user type.

For Individuals

Banking software designed for individuals are designed primarily to keep a record of the banking transactions of that individual. It is more or less like a bank passbook, but it’s on the computer. And most of all, it can keep records for several different bank accounts at one time. This way, individuals can keep a track of their spending and bank balances, across different bank accounts. Some of these software are often able to provide the same facilities for different users in the same household. It therefore makes sense to buy a software which provides this feature, especially if your family is going to be keeping track of their records as well.

Also, different standard features include password protection, and budgeting and planning features. There might be software available with portfolio management as a combination. This feature can be useful if you also have a varied stocks and bonds portfolio which you would also like to track. Some software are often compatible with the online or e-banking interfaces of different banks. Therefore, all one has to do is log in to the bank account via the software and then synchronize the transactions to get the latest up-to-date bank balance and transaction history.

It is always best to buy a software which combines most of the features and facilities that you are looking for.

For Banks

In today’s world, every bank has to be computerized to record the huge quantum of transactions it handles. It has become quite an accepted feature of banks to have a banking software to keep a track of its various transactions. These software, however, need to have much more in the way of features and facilities compared to the one designed for individuals. This is because banks by themselves have different types of transactions that they conduct.

Thus, the software must incorporate certain banking automations, such as the calculation of interest on a periodic basis, and on the basis of the type of account which the account holder possesses. It must have facilities where records of each account holder are clubbed together for easy access and viewing. It must have the necessary features wherein different types of accounts are handled: for example, loan, credit card, deposit accounts, checking accounts, current accounts, savings accounts, etc., depending on what the bank is offering to its customers. It must also be able to handle the variety of products offered by the bank, such as insurance and mutual funds.

Of course, these facilities must be linked to the various networks of ATM machines, and with the online banking module of the software. And let us not forget linking between the various branches of the bank. Also, the software must interface properly with the central bank so as to maintain and regularize its transactions.

Often these software come integrated with a CRM (Customer Relationship Management) module. All these features, and more, eventually translate to costs. There are a variety of ready-made banking software available in the market, which a bank can avail of. Apart from cost concerns, a bank should bear in mind the other typical concerns regarding buying software, such as cross platform integration, training facilities given by the company selling the software, and the kind of volume the software can handle.

Some banks often choose to develop their own software which is created to suit their needs. These products then need to be upgraded by the developers. There is always some kind of ongoing upgrade, maintenance, and development contract between the software developer/seller and the bank.

For Online Banking

Internet banking is a very common feature that different banks provide. As mentioned before, there are various software which can be integrated with the online banking interface provided by the bank. However, there are also virtual banks which exist only over the Internet. This kind of virtual banking requires specialized software which can handle online transactions and the different accounts and products provided to the account holders. Thus, it can be seen that even online, there are two different banking software types depending upon the end user needs.

As is the case with every industry sector, having a software that specifically caters to that sector’s needs has obviously filled in a very important void, which is the direct result of the growth and development of any economy.

The Danger of Banking Abroad

For US-based banks, capping ATM and teller withdrawals, as well as point-of-sale purchases, is standard practice regardless of where you are. But they take that practice to a whole new level as soon as you leave your home country.

When I’m in the States, I’m not actually sure what my daily withdrawal limit from an ATM is-though I’ve had to take out large chunks of cash once in a while, nearly wiping out my balance (to buy a car, for example). But I can tell you pretty definitively what my limit is when I’m not in the States, though. It’s USD 300 per day, and which is a fair bit of money.

But it’s not exactly all that much in certain circumstances. For instance, when my computer died the other day when I was in France, I went to a locally owned store instead of a massive electronics mart. In France, though, small businesses often take only a special kind of debit card: the Carte Bleue. If you haven’t got one, then cash is your only option. (They do this, by the way, to avoid being hit by the massive fees that credit card companies charge them per transaction, fees that allow those companies to offer you points and miles.)

So, off I went to the ATM, and then to the next, and the next. What was going on? Why couldn’t I take out my money? After taking out about 200 Euros (that is just shy of USD 300) from the first ATM, I wasn’t able to get anything more at that or any others. Imagine my frustration!

Now, if this were where the story ends, we’d really all have to agree that my unhappiness was pretty much my own fault. After all, everyone knows that banks put limits on ATM withdrawals. They have to, to protect themselves in the event that your card gets stolen and someone runs around taking out all the money (this wasn’t a credit card, mind you-just my normal ATM card). If they didn’t, since they’re responsible for that money, they’d go out of business in short order!

I called my bank and spoke for a while with a friendly representative who genuinely wanted to help but couldn’t. That is to say, she simply could not allow me access to more than 300 dollars of my money-not just from one ATM at a time, but from all ATM transactions combined throughout the course of a day. The fact that I was up against a deadline and in desperate need of a computer, at that point in the evening, I could only buy at a store that accepted cash? Well, it aroused her sympathy, but didn’t change anything. Eventually, I had the chance to speak with her supervisor. After a pleasant but frustrating discussion, in which I suggested that the bank’s policy of not changing this limit was absolutely ripe for a lawsuit, this representative softened a little.

Yes, she could raise my withdrawal limit-but only up to USD 500. It didn’t matter that it was my money and not credit. Nor did it matter that I had been on the phone for over half an hour (a fair portion of the time on my own dime, calling the US from a cell phone in France). And it didn’t matter that not being able to buy the computer that night would quite literally prevent me from practicing my livelihood, and could actually damage my earning power (because if you don’t accomplish certain freelance contracts on time, people stop wanting to hire you). The bank stuck to its policy, no matter what.

Therefore, it’s important to be aware of the various fees and limits, hidden or stated, when you are making financial transactions abroad. It is recommended that you visit your bank website and browse through the service charges and transaction limits before leaving the country.