(LibertySons.org) – Banks offer a range of products, but the main options are accounts where customers can keep and manage their money. What type of bank account you open depends on your needs and what you want to do with the funds you deposit. Here’s a look at the four main choices you will have.
Checking Account
A checking account allows you to deposit your money into the bank and write checks that other people cash to receive the funds. A checking account will usually come with a debit card, which you can use to spend your money more conveniently at vendors.
Financial institutions offer a range of options for this type of account. For example, some allow you to earn interest or have special features or benefits. Some are made specifically for certain groups such as students or seniors.
Most will also allow you to link to other accounts you have with the bank. This option enables you to transfer money between them quickly. Many banks offer free checking options, but you will sometimes have to pay a monthly maintenance fee.
Savings Account
As the name implies, a savings account allows you to save money by depositing it into the bank. The idea is for it to stay there so that the bank pays interest to you.
You will get a book that allows you to record transactions. You may receive a debit card, so you can easily deposit or withdraw money from the ATM. However, you will not usually be able to use it as you would a card you get for a checking account.
To deter you from using savings like a checking account, the bank may put a limit on the number of withdrawals you have access to in a month. You will also typically have a minimum balance you must keep to avoid fees.
Money Market Account
A money market account is like checking and savings combined. You can earn interest, write checks, and get a debit card for spending. Like a savings account, it will usually have a limit on the number of withdrawals you can make. These accounts typically require a higher balance and initial deposit.
The interest rates are usually much higher than those of standard savings accounts. Plus, they give you the flexibility of a checking account while deterring too much spending by limiting withdrawals.
Certificate of Deposit (CD) Account
CDs are a special type of savings account. You will have to agree to leave money in the bank for a set time. You will earn interest on it until it reaches maturity. Once the CD matures, you can withdraw the money or roll it into a new CD.
Because you cannot touch the money in a CD until it matures, it is suitable for long-term savings plans. The interest is often high, so you can make a better return on your money compared to what you might see with a regular savings account. If you have to take out your money early, the bank will charge a penalty.
Choosing the right type of bank account depends on your needs. You should carefully consider your spending habits and goals to determine which option is the right choice.
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