A Bank is a business that accepts deposits of cash and other assets, lends those funds to customers at interest, and provides many other financial services. A bank may be a private enterprise or owned by the government. It can also be part of a larger financial institution such as a credit union or savings and loan association.
In general, a bank acts as a safe place to store cash and to give people the opportunity to borrow money for large purchases like homes or cars. Banks can offer a range of other services including checking and savings accounts, debit cards and credit cards as well as loans and investment banking. Banks typically earn money through the payment of interest on loans and from transaction fees for various services such as wire transfers and check cashing.
The idea of a banking business emerged as early civilizations minted currency and realized that they needed a financial system to facilitate trade, distribute wealth and collect taxes. The earliest banks were likely temples that protected money from theft and natural disasters and allowed worshipers to borrow in exchange for a percentage of the value of goods or crops deposited in their care. Modern banks take their cues from the 18th century, when economist Adam Smith argued for a free-market approach that gave individual banks a lot of leeway to manage their own operations with little regulation.
Banks still operate on this basic concept today, although the number of options for where to stash your cash and how to borrow have grown dramatically. For example, a credit union may not be what most people think of as a bank, but it offers many of the same services and has gained in popularity because its members pay lower fees.
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