Commercial Banking

Rules About Commercial Banking

With more than twenty years experience as a Bank Teller and Customer, I have grown accustomed to the ins and outs of retail or commercial banking. You rarely get advice how to shop for banking services. We see advertisements in the media about rates and features but seldom see the benefits. I will share a few important facts on how to choose the right bank for your personal or financial goals. Once you are enlightened, you will be able to make wiser banking decisions. Let’s go to the Bank!

One of the most important factors in choosing where to open your bank account is finding a convenient location that suits your needs. Rates are not the issue since most banks have competitive interest rates.

The main focus is convenience and this does not necessarily mean close in proximity to work or home since banking is now more automated and we can bank anywhere using the ATM (Automated Teller Machine), telephone and online services. Your bank must be accessible twenty-four hours per day whether offline or online.

Here is a caution: not all transactions can be conducted remotely. For routine services, we don’t have to go to the location where we opened our account but finding a convenient location is always good. Be prepared to visit the bank to carry out the following transactions;

• Security update
• Signature update
• Cashing large sums of money
• Adding individuals or opening a new account
• Closing account

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Know Your Bank

It is important to know what products are offered by your bank. Don’t rely on cross-selling opportunities by the Teller or Customer Service Representative. You need to determine your most important banking needs when conducting commercial banking. While it is the bank’s responsibility to provide information about other products and services it offers, it is your responsibility to know which ones will provide you value, so you will not pay for products you do not need.

Here are few facilities that are offered by Banks nationwide:

ATM or ABM (Automated Teller/Banking Machine)

Depending on the machine used, there are fees charged to access funds. If you use your own bank’s ATM you might not be charged for using the machine. If you do otherwise, you may be charged a minimum fee per transaction.

Machines with the ‘Plus’, ‘Visa’ and ‘Master card’ signs are generally international brands that facilitate international transaction. This means that you can access funds outside the home country of your bank. One of the most discomforting things about some ATM’s primarily in the United States is that they only pay out  a minimum $20 denomination. I would imagine that any bank that pays out lower denominations especially $10 and $5 notes, would grab a greater percentage of the teller machine market.

Money Transfer Facilities

Money transfer facilities are courier services that work in tandem with financial institutions to remit funds on their behalf between remote locations, whether international or intra-country. Customers are charged by their domicile remittance couriers (their own institution) whenever funds are sent. The most recent funds transfer service is sending money through email and Paypal. The banks have even tightened their grips on this SUPER convenient remittance service as unscrupulous individuals seek ways to rob unsuspected consumers.

Night Depository

Another convenient deposit service in commercial banking is Night Depository. This offers depositors the convenience of depositing their money outside of regular banking hours. A depository vault with lock is attached to the wall of the bank where customers have unlimited access 24 hours a day. There is usually a charge to utilize this facility, however, some banks may offer this service free to preferred customers. This product is normally geared to businesses who manage large sums of cash on a daily basis.

Similar to this is the Safety Deposit Box but the minor difference is that it allows you to store personal effect in a vault on the bank’s premises, for your own security. This may also attract a monthly or annual charge. This facility is accessed inside the bank.

Assurance and Insurance

Bank assurance or insurance banking is also a profitable business niche for banks and Insurance companies. The banks saw it fit to compete with the Insurance companies when they embarked on this operation some years ago. Now it is one of the biggest markets in the financial sector, as wise investors and consumers save funds for retirement and unforeseen future events.

Foreign Exchange Trading

Foreign exchange trading is extremely volatile which means the stock market can appreciate (go up) or depreciate (go down) by the second as a result of irregular trends in the market.  This fluctuation (change in value) is dependent on foreign market investors who depend on foreign exchange in their international business trading.

The Bloomberg Stock Money Market and the Jamaica Stock Exchange draw nationwide and worldwide attention on a daily basis as millions of dollars of foreign exchange passes through this medium. Private bankers most times act as brokers to find the right market for larger or riskier investors. On a smaller scale, commercial banking opportunities provide foreign exchange trading within their branches for their customers’ business and personal needs.

Saturday And Sunday Banking

One super convenience is weekend banking but there is a race between the banks. Some have scaled down operations to facilitate this as this is an expensive operation, while others have flexible opening hours to facilitate later or earlier transactions.

Credit Card And Commercial Paper

Commercial banking offers short-term lending through Credit Cards and Commercial papers. A credit card allows users to spend now and pay later but be careful how you spend, as this unpaid balance attracts high rates of interest and is charged to your card.

Commercial paper is a promissory note issued to you by the bank in the form of credit. This could be a refinancing opportunity for any debt that you might currently have. However, the rule of thumb is; always remember that a debt is never complete until it is paid off in full and there will always be charges for the use of the facility.

Loan
Loan is also a well-known product on everybody’s lips. One of the ways that commercial banking earn funding is through interest charged on issuing loans. The interest that is calculated from the principal borrowed, is used to finance further lending and growth for the institution.

There are two ways in which interest is calculated; straight line and reducing balance method. Most banks now have amortized their loan facility. This means that payments are fixed each month. The monthly figure is shared by paying the interest on the loan, while the rest reduces the principal borrowed over the life of the loan.

Another form of a loan could be an overdraft facility. This type of credit facility is similar to the credit card as the bank offers an opportunity to exceed your balance in your checking or savings account. Most times this additional credit is secured, which means that the bank hypothecates (hold) funds or assets of similar value against the amount overdrawn.

Fixed and Ordinary Deposit
Fixed or ordinary deposits is another source of income for commercial banking. Fixed deposit means that a certain amount is deposited at an agreed rate, while an ordinary deposit is a regular saving account that you manage on a normal basis. These funds are reinvested by the bank at a higher rate and a portion of the proceeds from the return is paid over to the customer as interest.

Currently, these rates range from as low as 0.5 percent to 1 percent or higher (USA) and .085 to 3.75, percent (JAM) depending on how it is tiered (split). The amount of money you deposit and the length of time it is held by the bank will determine the rate of interest that you will receive from your bank. An ordinary savings account doesn’t receive much interest but it could certainly offset the charges from the tax that is levied (charged) against the account.

Bank On Your Bank

These are few products and services offered through commercial banking. The Bank should be your friend and not your enemy. Know your bank and allow your bank to know you.  On the other side of the counter, monies that are deposited in our financial institutions help our country to operate effectively on a macro level or larger scale. We are the ones who control or determine the country’s inflation as monies are circulated daily through banking. The central bank also forms the center or nucleus of all the financial operations related commercial banking.

Once we develop a good rapport and relationship with our trusted financial adviser, we can always bank on our banks!

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