What is the importance of commercial banks?


Quick Answer

Commercial banks are important because they lend money to people, accept deposits, process checks and payments, and offer secure havens for treasured items, according to Investopedia. Commercial banks also attract large amounts of capital from investors.

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Full Answer

Commercial banks act as a control mechanism for the flow of capital, as noted by Investopedia. This allows the banks to become prosperous, increasing the stock value for investors who have a stake in a particular bank. Commercial banks can invest on Wall Street, engaging in such investment endeavors as securities.

Commercial banks are places where people interact with these institutions every day, as reported by Investopedia. For instance, debit card transactions and making online payments are everyday encounters for commercial banks. Many people desire loans and credit from banks, agreeing to pay the money back at a later date.

Commercial institutions are especially crucial for small businesses because owners rely on loans and credit to help their businesses thrive, according to the Houston Chronicle. Owners can also get business debit cards from banks, which are helpful when keeping track of various transactions. Many banks have investment departments that guide customers on matters of market finance. Small business owners can foster closer ties with the loan department by also contacting the investment wing, and owners can gain sound financial advice that pertains to stocks and bonds.

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