Banking, money, finance and tax

In any period of time in your life, you’ll probably want to open a bank account. There are
two main types of accounts: a current account and a savings account. You can use a
current account for your day-to-day banking needs. Your bank might give you a cheque
book, which allows you to write cheques to pay for goods and services. You’ll probably
also have a bank card which allows you to withdraw cash from cash machines (also
known as ATM or “hole in the wall” machines) and to pay for goods in shops. You get a
secret pin number (personal identification number) that you use when you withdraw cash.
If you receive a cheque, you can pay it in or deposit it at your bank. You can also pay
in cash (money). If you want to convert your cheque into cash, you can cash the cheque.
Some companies can also pay money into your account via a direct bank transfer.
A savings account should pay you interest. Most banks give you a different rate of
interest depending on how much you are saving, and how much notice you give before
withdrawing money.
In the UK, people traditionally use banks for a range of services. As well as an overdraft
facility (where you borrow money from the bank), people also get a mortgage (loan to buy
a house), personal loan, and insurance from their banks. You can also arrange a standing
order – regular payments made to an individual or a company supplying a service. High
street banks (the sort of banks which you can find on any high street) are also good places
to change money.
Many banks now offer telephone banking and internet banking. This means that you can
manage your finances without going to the local branch (office) of your bank. Typically,
you can make payments directly from your account, or transfer money from one account
to another if you have an internet banking facility.
If you go into the branch of your bank, you’re likely to deal with a cashier, who can carry
out a range of banking services for you. If you need more specialist help, you could make
an appointment to see a personal adviser, business adviser, or even the bank manager.
Because there are strict anti-money laundering laws in the UK, opening a bank account
is not as simple as it once was. You’ll need to provide proof of identity (such as a current
passport or driving licence) and proof of address. You can do this by showing a
recent utility bill (electricity, water or telephone bill), or a bank or credit card
statement that has been sent to your address. (A bank statement is a list of money that
has been paid in or paid out of your bank account over a period of time such as three
months.)
The Central Banks and Finance ministers are trying to decide whether to inject more
money into the financial markets (places where stocks or commodities for example are
bought and sold).
Many countries are now in an economic recession. Apart from the credit crunch, there are
other signs of a downturn, such as rising inflation and an increased cost of living.
Governments often respond by cutting interest rates (to bring down the rate of
inflation).To compound the misery (=make things worse), falling house prices mean

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some home owners face negative equity (when your house is worth less than what you
originally paid for it).
Overall, the forecast is pessimistic or gloomy. High street banks lend money to
customers in the form of loans (such as car loans or personal loans) or in the form of
mortgages to buy houses.
Subprime mortgages, now often referred to as toxic mortgages, were sold to people with
poor credit ratings. It is a combination of this type of risky lending, falling house prices
and high interest rates which led to defaults on mortgage payments
and foreclosures (=repossession). This in turn triggered the global financial crisis.
A number of banks have already gone bust or have been nationalized (= bought by the
government) who try to reassure customers that their savings accounts are safe.
However, consumer confidence is low.
People worry about losing their jobs, or being made redundant. Some industries
are cutting their workforce, and laying off staff. These job losses / job
cuts / redundancies mean that there will be more claimants (for unemployment benefit)
– or more people on the dole. (dole = unemployment benefit).

Understanding Taxes
To help fund public works and services—and to build and maintain
the infrastructures used in a country—the government usually taxes its individual and
corporate residents. The tax collected is used for the betterment of the economy and all
living in it. In the U.S. and many other countries in the world, taxes are applied to some
form of money received by a taxpayer. The money could be income earned from
salary, capital gains from investment appreciation, dividends received as additional
income, payment made for goods and services, etc.

A percentage of the taxpayer’s earnings or money is taken and remitted to the

government. Payment of taxes at rates levied by the state is compulsory, and tax
evasion—the deliberate failure to pay one's full tax liabilities—is punishable by law.
Most governments use an agency or department to collect taxes; in the United States, this
function is performed by the Internal Revenue Service (IRS).

There are several very common types of taxes:

 Income Tax —a percentage of individual earnings filed to the federal government

 Corporate Tax—a percentage of corporate profits taken as tax by the government
to fund federal programs.
 Sales Tax—taxes levied on certain goods and services
 Property Tax—based on the value of land and property assets
 Tariff—taxes on imported goods imposed in the aim of strengthening internal
businesses

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 Estate tax—rate applied to the fair market value of property in a person's estate at
the time of death