The financial system also provides a mechanism for making payments for goods and services. Certain financial assets, principally checking accounts and NOW(negotiable order of withdrawl) accounts, serves as a medium of exchange in the making of payments. Commercial banks - the principal institutions within the financial system - create checkbook money for public use by making loans. In recent years, mutual savings banks and savings and loan associations along with commercial banks have offered NOW accounts which bear interest, as a saving account does, and permit the customer to draft the account to pay for goods and services, just like a checking account. Since 1977, credit unions have offered "share draft" which, like the NOW, earn interest and can be used to make payments. Plastic credit cards issued by many commercial and savings banks, credit unions, oil companies, and retail stores give the customer instant access to short - term credit but also are widely accepted as a convenient means of payment.
Another type of plastic card - the debit card - is also used to make purchases of goods and services today. Debit cards, currently issued free by about 10 percent of all banks in the United States, are used to charge a buyer's deposit account for purchases of goods and services and transfer the proceeds instantly by wire to the seller's account. Debit cards and other electronic means of payment, including telephone transfers, cable hookups through in - home TV sets, and computer terminals in retail stores, are likely to displace checks, currency, and other pieces of paper as the principal means of payment in the years ahead.
