Did you know? Recently there has been a commercial for the bank down the street which is offering a free bank account! It sounds like a great idea but before you go sign up for that account and start banking with any specific bank you should know that bank accounts are not one size fits all.
When you understand the different types of bank accounts you can actually make your money work for you in the best possible way.
Different Types of Bank Accounts
Usually the accounts that you see offered on commercials are the checking accounts. These are the most common type of bank account as they allow you to withdraw money from your account by writing checks and with a debit card.
For people who need to have access to their money without having to jump through hoops or wait for a check to be cut, etc, these accounts serve as a great option. Some checking accounts pay interest, allowing you to take advantage of average daily balances, but most typical checking accounts, also known as a demand deposit account, will not pay interest.
Money market accounts offer interest on the accounts as well as allows you to write checks on it. A money market account allows for you to benefit from a higher rate of interest than your typical savings or checking account, but they do require that you have a higher minimum balance than you would have to have with other accounts.
Unlike checking account, withdrawing funds is not always that simple although you can write with checks on these accounts. In addition, there are usually more fees associated with this type of account, making it a good option for those that don’t necessarily need to access the cash.
Another common type of account are the savings account. This is the type of account that most people use to keep the bulk of their money in. Although you do not have the benefit of being able to write checks from the account, these accounts offer the benefit of interest. You may be limited as to the number of withdrawals or transfers that you are allowed to make each month and if you go over you may be charged a small fee.
Besides these, there are time deposit accounts, or certification of deposits or CDs. These accounts offer guaranteed interest rates and allow for the account holder to choose how long they would like their money to be on deposit, you can generally choose anywhere from a few days to a few years.
If you want to earn a high rate of interest on a specific amount of money this is a great choice but this is not the type of account that you want if you need to access the money.
As you can see, there are many different account types for you to choose from. You must discuss all your options with the bank before you end up choosing one. If you still aren’t sure let them know what you will be using your account for and they will likely be able to help you make the right choice for your financial needs.