What are Banking products?
A bank is a financial entity that has the license to receive deposits and issue loans for its various customers, be it private or commercial. Banks are also licensed to provide an array of products and services for its customers like loans, mortgage facilities, credit cards, insurance, remittances, cheque collections etc… for a minimal fee.
What must one consider before selecting a Banking product?
A banking product is just like any other product that you would buy. Before choosing a banking product it is necessary to check the feasibility of purchasing the product. It would be prudent to choose the terms of sale (terms and conditions on offer from the bank), the rate at which the product is being offered to you (interest rates), the fee that is being collected from you for both product and service, the hidden fee, the late payment charges, the charges being levied for delay in repayment etc…
It would also make sense to check if the terms on offer match your requirements for the product. A comparative study with other banks would often prove beneficial and would help us to make an educated and informed choice.
What are the different types of Banking products available in Oman?
- Savings Account
Savings Account is the most basic of Banking products. It is possible to open a Savings account with any financial institution. The purpose of the Savings account is to securely hold the customer’s funds over a period of time. It eliminates the risk of holding money privately or at home. The benefit to the customer is that he has the option of creating further wealth by earning interest on the money that he deposits in the Savings Account. However, this might require a commitment from his end, such as ensuring that the funds remain deposited in the Bank account over a period of time. The interest rate being offered to the customer could vary depending on the bank that he chooses. The customer could also be bound by certain terms and conditions when he deposits money in Savings Accounts. These could include minimum balance requirements, withdrawal charges, bank deposit and withdrawal fees, bank transfer fees, online banking charges etc…
- Credit Cards
A credit card is an instrument of credit that the bank offers its customers, where in customers can use the card to make purchases or payments, on credit, in the present time. The bank offers the customer a grace period to pay off the bank at a future period in installments. The bank usually charges the customer interest or a fee for this service. The bank also levies interest and a late payment fee if the money credited is not paid back in the stipulated time. Some cards carry a yearly maintenance fee.
Banks usually stipulate a limit for customer spending when it comes to usage of credit cards. The advantages to the customer is that he does not need to carry huge amounts of cash when going in to make purchases, he can use a line of credit to make purchases even if he does not have the necessary funds with him at the time. Also, now credit cards are an important mode of payment when it comes to online purchases, transactions or payment of bills.
- Debit Cards
A Debit card is another example of a banking product. It is a facility given by the bank to its customers when they open an account with the bank. It basically allows the customer to utilize or spend the money in their account without actually handling cash. The customer can use the card to make payments, conduct transactions or withdraw cash from their accounts. The bank will deduct the amount from the money they have deposited in their account.
Just like credit cards, the debit card eliminates the need to carry around huge amounts of cash. However, the customer does not get a line of credit extended to him by the bank. He can only use the card till such time as he has funds in the bank. There is no question of overextending his credit because he can only use the funds he has deposited in the bank. The card works only if he has money in the account to cover the transaction amount. The banks may levy monthly fee or transaction fee on debit cards.
- Bank Loans
Bank Loans refer to specific amounts given out on credit to customers, for a fixed time period with predetermined terms of repayment. The loan amount is determined on the basis of the customer’s credit worthiness. The banks advance loan funds to the customer at fixed rates of interest and often levies some sort of fee for granting the loan. The interest rate is chargeable should the customer utilize the loan funds or not. Some banks may require the customer to provide guarantee on repayment in the form of personal checks, letter from employer confirming salary transfer etc…The loan is usually meant to be repaid in installments.
The bank usually reviews the customer’s credit score and viability before advancing payment. The advantage of loans is that customers can usually secure credit at lower rates of interest as compared to credit cards or other instruments of credit. There are different kinds of loans advanced by banks such as cash loans, car loans, mortgage loans etc…
- Online Banking
Online banking involves the use of internet facilities for the delivery of banking products and services. Online banking has removed the boundaries between demographics and nationalities. With online banking, the average customer does not have to make a trip to the bank or stand in queue’s to carry out daily transactions. Payments, Bank transactions and remittances are all a click away. Nowadays online banking is a integral part of the banking industry. People seek convenience and do not want to deal with the cumbersome nature of physical banking anymore.
Online banking transactions are processed in a quicker manner and this is now considered as a norm rather than an exception. It reduces transaction costs and increases convenience to customers, thereby inspiring customer loyalty.
Visit www.smartmoneyeducation.com for more information on choosing the Banking products that benefit you the most.