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How Do Banks Work?

The manner in which banks operate might seem like a rather basic topic, but given how complex financial markets have become in recent years, it’s helpful to revisit the fundamental simplicity of the industry.

Having money exactly when you need to it—and earning income on it when you don’t—is a problem as old as money itself. Banks exist to solve that problem, and have served as an intermediary between savers and borrowers since the Italian Renaissance, the Crusades, or even earlier, depending on which historians you consult.

More specifically, banks lend the funds deposited into savings accounts and certificates of deposit (CDs) to other customers, who repay the money with interest over time. Depositors entrust their money to banks for two reasons: 1) banks offer safe-keeping, borne from FDIC insurance; and 2) banks pay interest on deposits, allowing funds to grow over time. Banks, in turn, make money, by charging a higher rate of interest on their loans than what they pay on deposits. Banks can have other sources of revenue as well, including investments, fees on various services, and commissions on the sale of financial products such as mutual funds and insurance.

In addition to serving as a vector for borrowing and lending, banks play a central role in a number of other financial mechanisms. For example, banks process payments between buyers and sellers and they exchange foreign currencies. Banks also carry out governmental monetary policy by increasing or decreasing the amount of money they keep in reserve.

Questions & Answers

Comparing banks can be tough. But you've got the knowledgeable WalletHub community on your side. Other consumers have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not the financial institution's responsibility to ensure all posts and questions are answered.

Which bank has an app that allows you to deposit money orders through it?

Upvotes

Kathryn B. Hauer, CERTIFIED FINANCIAL PLANNER (TM)

Hi! Good question – we all know that CHECKS can easily go through most mobile apps to most banks, but money orders are a little different. It looks like most banks allow checks AND money orders to be deposited through their individual bank mobile apps. Some banks don't have that option quite yet, but it looks like banks are adding this service more and more, so if your bank doesn't have it now, they may soon. So if, for example, you bank at Chase or Wells Fargo, you would download their app and then be able to deposit your checks and money orders right there on your smartphone. Hope this help. Best wishes to you and thanks for writing!

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What banks do personal loans?

Upvotes

Rick Bormin, Personal Loans Moderator

Many banks do personal loans, including Wells Fargo, Citibank, American Express, Discover and U.S. Bank, to name a few of the biggest lenders. In addition to large national lenders, there are thousands of local banks that offer personal loans, giving borrowers plenty of choices. Below, you can see some of the biggest banks that do personal loans, along with their rates.

Major Banks That Do Personal Loans

American Express: 6.98% - 19.98% APR
Discover: 6.99% - 24.99% APR
Wells Fargo: 5.99% - 19.99% APR
Citibank: 7.99% - 23.99% APR
Barclays Bank US: 4.99% - 20.99% APR
Citizens Bank: 6.79% - 20.88% APR
PNC: 9.24% - 19.44% APR
TD Bank: 6.99% - 21.99% APR
USAA: 7.24% - 17.65% APR

If you don't find a bank that you like from among the biggest lenders in the country, you can check out local banks that do personal loans. You can find banks in your area on WalletHub.

Keep in mind that banks aren't the only financial institutions that offer personal loans. You can get a personal loan from a credit union or an online lender, too, so it's worth considering all your options before you settle on one. You can take a look at WalletHub's picks for the best personal loans to get started.

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Do banks offer debt consolidation loans?

Upvotes

Adam McCann, Financial Writer

Banks do offer debt consolidation loans but not by that name. Rather than providing loans solely for the purpose of debt consolidation, banks offer loans and lines of credit that can be used for debt consolidation as well as other types of transactions. These include personal loans, home equity loans, home equity lines of credit (HELOCs), and credit cards.

Just four of the 10 largest consumer banks in the U.S. have all four major debt consolidation options. But nine have more than one. Let's take a look at some of the biggest banks in the U.S. and which methods of debt consolidation they offer.

Banks That Offer Debt Consolidation Loans & Lines of Credit

Bank	Personal Loans	Home Equity Loans	HELOCs	Credit Cards
Chase	No	No	Yes	Yes
Bank of America	No	No	Yes	Yes
Citibank	Yes	Yes	Yes	Yes
Wells Fargo	Yes	No	Yes	Yes
Goldman Sachs (Marcus)	Yes	No	No	Yes
U.S. Bank	Yes	Yes	Yes	Yes
PNC	Yes	Yes	Yes	Yes
TD Bank	Yes	Yes	Yes	Yes
Capital One	No	No	No	Yes
SunTrust Bank	Yes	No	Yes	Yes
HSBC	Yes	No	Yes	Yes
Ally Bank	No	No	No	Yes
KeyBank	Yes	Yes	Yes	Yes
Barclays	Yes	No	No	Yes
USAA	Yes	No	No	Yes

Pretty much any bank will offer at least one financial product that you can use for debt consolidation. However, you shouldn't discount other types of lenders. Credit unions and online lenders offer debt consolidation loans, too, and some of them may have better deals than banks.

How can I put a hold on a money order?

Upvotes

Sydney Garth, Credit Cards Moderator

You can only put a hold on a money order that hasn't been cashed.
You can start the process by contacting the issuer and completing a request form. If it was a postal service money order, visit a post office to fill out the form.

If you're not sure about your money order's status, you can track it by calling the issuer's customer service number or using the search feature on their website.

Is FSNB a good bank?

Upvotes

Alexandra Barring, Banking Moderator

You can read about FSNB and find reviews from users here. The bank was founded in 1946 and is a leader in military banking. Currently, the bank provides services for the military and civilian communities. The bank offers checking, savings, credit cards. mortgages, auto and personal loans.

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Editorial and user-generated content on this page is not provided, commissioned, reviewed, approved or otherwise endorsed by any third party company. In addition, it is not any company's responsibility to ensure all posts and/or questions are answered.

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Bank of America

U.S. Bank

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HSBC

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IBERIABANK

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Citibank

PNC

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Armed Forces Bank

How Do Banks Work?

Questions & Answers

Which bank has an app that allows you to deposit money orders through it?

What banks do personal loans?

Major Banks That Do Personal Loans

Do banks offer debt consolidation loans?

How can I put a hold on a money order?

Is FSNB a good bank?

Ask the Experts