In today’s world, almost everyone holds a bank account. Banks offer different types of accounts to meet the needs of individual customers. Most banks give you the option to choose between five different types of accounts. The choice is up to the customer, depending on his or her needs.
Here is a brief description of each types of individual bank account.
Savings account: Banks across the world offer savings accounts. The intent of such accounts is to encourage savings. Whatever surplus you have in hand, deposit it into your savings account. The interest that you earn on a savings account is more than what you would earn from a checking account. While can make deposits and withdrawals, you cannot write a check. Note that there could be a fee in case your balance falls below the stipulated minimum. A record of transactions in such accounts is entered in a passbook or can be provided to you in a monthly/quarterly statement.
Basic checking accounts: These are no frills accounts which offer you certain basic functions. The cost of operating such an account is very low. You can write checks through this account. However, there is a restriction on the number of checks that you can write in a month. Also, such accounts do not pay any interest.
Interest bearing checking accounts: You enjoy the privilege of a host of services including writing unlimited checks. But all this entails a higher cost. The interest that is paid on the account is dependent on the quantum of balance in the account. In case the balance falls less than that stipulated, a monthly fee is charged. You can write a number of checks in a month and avail all the services attached. If you choose to open this type of account, you will also earn some interest.
Certificates of deposit: This type of deposit is held for a specified period, hence referred to as Time Deposits. Ranging for a period from 3 months to 6 years, these accounts offer a high rate of interest. The high interest rate is compensation for the time your funds are locked in. A longer deposit duration fetches you higher interest rates. In case you need to withdraw your money before maturity, you will have to pay a heavy penalty. Thus, you will not only forgo your interest amount, you will also lose some of your principal amount.
Money market deposit accounts: Such accounts invest your funds in the short-term debt market. This include, but are not restricted to Commercial Paper, Certificate of Deposit and Treasury Bills. To earn interest on such an account, you need to maintain a high balance. The interest rate on the money market deposit accounts is higher that the rate of interest on checking accounts. While operating this account, there is a restriction imposed in check writings. Three checks and six total transfers is all that you are entitled to per month. All of the above five types of accounts are secured by FDIC to the extent of $100,000.