Most people use checking accounts to buy things and pay their bills. On the other hand, a savings account helps you save money for the future. Even though many banks will try to get you to open an account with freebies and other perks, you shouldn't choose an account based only on what it gives you when you open it.
Different kinds of checking accounts exist. Some of them are Basic, Free, Express, Lifeline, Interest-bearing, and so on. Services vary from account to account. Because of this, it is very important that you first know what you need from your checking account and then choose the right one.
For example, if you put money into a Basic checking account, you won't get any interest on it. In other words, if you choose this account, you will only be able to do things like pay your bills and use your debit card. You can only write a certain number of checks, and if you go over that number, each check will cost you more. Also, some banks require you to keep at least a certain amount in your account to avoid paying monthly maintenance fees.
The service is almost free of charge with a free checking account. There are no rules like a minimum balance or limits on how many checks can be written. There are no service fees, no matter how many or what kinds of transactions you do. But if your check bounces, you will be charged a fee that is fair.
Accounts that pay interest pay out a very small amount of interest every month. Most banks need an account to have a minimum balance in order to work; if it doesn't, a $10 service fee is charged every month.
People who don't want to go to the bank can get an express check account. The service includes the use of an ATM, phone, PC, and an unlimited number of checks. Even though there is no monthly fee, the customer may end up paying a huge service charge because of all the extra transactions.
The Lifeline account is a savings account for people with low incomes. The services include a certain number of transactions for a fee that ranges from $0 to $6 per month. The law usually decides the fees, minimum amount, and other terms of this account, not the individual banks.
People know savings accounts for their interest rates, which come in different forms. A savings account is a "risk-free" way to invest for people who don't want to take chances with mutual funds or stocks.
There are both short-term and long-term ways to save. Certificates of Deposit are a good choice for people who want to put money away for a long time. They have higher interest rates, but if you take money out early, you have to pay a fee. Simple-interest savings accounts are good, but compound-interest savings accounts are better. In a savings account with compound interest, each year's interest is added to the previous year's principal, and the sum of the two is the principal for the next year. So, every year, the amount will grow by a factor of ten.
No matter what kind of account you have, you need to know the basics of how the service works. When opening a savings account, you might think about the benefits, especially the interest. When opening a checking account, you might think about the services you need.
