Personal Banking

Personal Banking refers to a wealth of services available to individuals from financial institutions. Many of these services may be quite familiar, like savings and checking accounts, a variety of lending options (personal loans, mortgages, lines of credit, etc.), and credit card services. Others are newer features made possible by the advance of Internet technology, such as the ability to view and interact with accounts online, make deposits and payments via phone or online service, or access automated teller machines (ATM) around the world any time of day or night.

Personal Banking refers to a wealth of services available to individuals from financial institutions. Many of these services may be quite familiar, like savings and checking accounts, a variety of lending options (personal loans, mortgages, lines of credit, etc.), and credit card services. Others are newer features made possible by the advance of Internet technology, such as the ability to view and interact with accounts online, make deposits and payments via phone or online service, or access automated teller machines (ATM) around the world any time of day or night. Financial institutions are constantly innovating and adding other personal banking services every day, as well, making newer services like financial advising, retirement planning, and automatic bill payment common at many modern institutions.

Personal Banking Not Just for Banks

Though typically referred to as “personal banking,” a wide variety of institutions offers these financial services, not just banks. For example, in some countries insurance companies have begun moving into the world of personal banking, offering personal lending, savings, and mortgage services. Some countries allow non-profit collectives made up of members with access to deposited funds that can be used for lending and other personal banking services, even though these institutions are not technically banks (like credit unions in the United States).

As competition has intensified, and a wide array of new technologies has entered the market, the range of services that fall under the umbrella of “personal banking” has also grown beyond the traditional definition of banking. Investment advising and management services, insurance programs, pension and retirement plans, online bill payment, mobile banking, and a wide array of other services are now standard fare at many personal banking institutions around the world (right beside more traditional offerings like deposit accounts and lending solutions).

Thus, personal banking has grown and evolved from its traditional roots, and will continue to do so. As financial institutions compete and innovate, new ways of investing, accessing, and managing money will continue to evolve.

Online Banking

One of the most exciting developments in the world of personal banking is the advent of online banking. Often referred to as Internet banking, e-banking, mobile banking, virtual banking, or a host of other names, online banking enables customers of a financial institution to conduct transactions on a website or through a mobile application. This improves the financial institution’s engagement with the customer, allows customers greater access and flexibility when managing their funds, and provides an array of methods for individuals to acquire the financial products and services they need the moment they need them, no matter where that customer may be.

Online banking allows customers to access features and services, such as:

* Viewing their account balances and recent transactions,

* Downloading bank statements and copies of checks and deposit slips,

* Ordering checks, deposit slips, and other banking supplies

* Transferring funds between accounts,

* Paying third parties (such as bill payments or transfers)

* Purchasing investments, insurance, or retirement products

* Applying for, managing, or repaying loans,

* Integrating up-to-date account information with accounting software

Online banking has largely revolutionized the way that financial institutions do business in the 21st Century. It is now possible for someone to create a savings and checking account, pay their bills, obtain a loan, and make deposits, all without ever setting foot in a physical bank location.

This has led to the advent of new “virtual” banks. Many of these institutions appeal to customers willing to sacrifice the convenience of a physical branch location in exchange for higher interest rates on savings and investment accounts, lower interest rates on loans, and other incentives. This creates an entirely new way of engaging in personal banking in which a customer never deals face-to-face with a banker.

Retirement Plans

Another important offering at many modern institutions is a retirement plan. In addition to traditional deposit accounts (i.e., checking and savings accounts), many banks and other financial institutions now offer various forms of retirement planning and investing. These vary by country and financial institution, but generally offer a means for one to invest a portion of their earnings (often without taxation by the government) in an account designed to provide for the customer’s retirement.

Most of these plans offer penalties for taking money out early. This ensures that the funds remain in the market longer, supporting economic growth and ensuring that an investor will have means of supporting his or herself after retirement with less reliance on government programs. In exchange, the government foregoes collecting any tax on these funds until they are finally withdrawn after retirement (and even then, often at a discounted rate).

Introduced in the United States in 1974, an Individual Retirement Account (IRA) is a form of individual retirement plan provided by many personal banking financial institutions in the US. It provides tax advantages for retirement savings held in a trust or custodial account set up for the exclusive benefit of the investor or his or her beneficiaries. Upon reaching retirement age, the IRA converts to an annuity, paying out the invested funds (plus interest) on a periodic basis similar to employment pay cycles. There are many types of IRA’s (primarily distinguished by the means in which funding the account happens) but they typically share the same investment limits, protection from creditors, early withdrawal penalties, and inheritance rights.

International Products

America’s IRA is very similar to a product available in the United Kingdom called an ISA (Individual Savings Account). Created in 1999, The ISA is a form of tax-free saving that allows one to save up to £7,200 each year in an ISA. He or she need not pay any tax on the income received from the savings. ISA’s take two forms, the cash ISA or stocks and shares or insurance. A cash ISA works like a savings account, but has a limit of £3,600 each year and the investor can only save with one ISA provider per year. Stocks and shares or insurance ISA investing allows an individual to invest up to £7,200 each year in stocks and shares or a life insurance plan. It is possible to invest in both forms of ISA, but the total investment cannot exceed £7,200 in order to retain the tax benefits.

Other nations have other forms of retirement accounts, many with similar tax benefits and social goals. One can usually learn more about the available options in a particular country by visiting a personal banking institution in person or online.