I have just finished my first week of training at The Co-operative Bank. It is clear that the pressure is on to sell products to customers, but it is also clear that the product must be suitable. I now must produce a report describing three retail banking services appropriate to the needs of two contrasting customers including teenagers and students and established families.
Teenagers and students aged 17 to 22 years of age will use different products from banking services. Firstly, they will use a savings account. A savings account is a deposit account held at a bank or other financial institution that provides principal security and a modest interest rate. When putting money in the savings account interest will be earned. Money can be deposited and withdrawn from the account; the money can be accessed instantly. Teenagers and students will use a savings account to save money for things such as driving lessons, a car or university.
Teenagers and students will also make use of current accounts. A current account is an account with a bank or building society from which money may be withdrawn without notice, typically an active account catering for frequent deposits and withdrawals by cheque. In a current account wages or salaries will be deposited into the account and can be withdrawn instantly. With current accounts you can set up direct debits that instruct the bank to pay certain bills and when the money enters the account the bills will automatically be paid. A debit card will be obtained with a current account. A debit card is a card allowing the holder to transfer money electronically from their bank account when making a purchase. The card also may be contactless which makes payment easier for the owner. A teenager or a student will use a current account to pay for items that they want to buy and receive wages or salaries from their part time jobs. They may also use direct debit to pay off bill such as their phone bill.
The last product that a teenager or student may use will be an overdraft. An overdraft is loan arrangement under which a bank extends credit up to a maximum amount against which a current account customer can write checks or make withdrawals. The most common form of business borrowing, an overdraft is a type of revolving loan where deposits are available for re-borrowing, and interest is charged only on the daily overdraft balance. It will allow owners of the account to take out more money than they have in their account; there is a limit which is chosen by the bank. There will be interest charges that will need to be paid back. Students and teenagers do not earn a large sum of money due to education and therefore they may need some extra money which could come from an overdraft. They may need the overdraft to pay for school essentials or funds or important bills that they don’t have funds for in their current account.
Established families may make use of similar products that teenagers and students will use but also make use of other products that they probably wouldn’t use. For instance established families will make use of secure loans. A secure loan is a loan which is backed by assets belonging to the borrower in order to decrease the risk assumed by the lender. The assets may be forfeited to the lender if the borrower fails to make the necessary payments. A secure loan will be a large sum of money usually up to £25,000 borrowed from a financial institution. It is paid back over a long period of time with interest. In order to gain the loan the bank must look at the credit history and affordability of the person to make sure they will be able to pay it back.
The loan will be secured onto property of the owner in which could pay the loan off if the person couldn’t themselves. It may be a car, house or something else that has higher value. An established family may want to gain a loan because they may have children that they will need to look after that costs lots of money or perhaps they have children going into university that they would like to fund themselves rather than the child getting a loan. They also may need certain things like a new car or house that they cannot afford on their own accounts.
Similarly, established families may also take an unsecure loan. A unsecure loan is a loan that is issued and supported only by the borrower’s creditworthiness, rather than by a type of collateral. An unsecured loan is one that is obtained without the use of property as collateral for the loan. Borrowers generally must have high credit ratings to be approved for an unsecured loan. An unsecure loan is very similar to a secure loan but it isn’t secured on assets. It is relied upon on the person’s income. They will use an unsecure loan on similar things as a secure loan such as providing for family or using the money for a car.
The last product an established family can use is a credit card. A credit card is a card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. An established family may use a credit card to buy essentials for their family that they cannot buy by debit card such as large weekly food shops or presents for children. Another reason why an established family will make use of a credit card is so they can shop online safely. When you buy goods online with a credit card you are protected if it goes wrong. For example, if the item doesn’t get delivered to you or the items are broken. This then means the credit card company will pay you back the money unlike a debit card.
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