Have you heard? A bank down the street recently ran an ad saying that they offer free bank accounts. It sounds like a good idea, but before you go sign up for that account and start banking with a certain bank, you should know that bank accounts are not all the same.
When you know about the different types of bank accounts, you can make your money work for you in the best way possible.
There are several kinds of bank accounts.
Most of the time, the accounts you see advertised are checking accounts. This is the most common type of bank account because you can write checks and use a debit card to take money out of your account.
These accounts are great for people who need access to their money without having to jump through hoops or wait for a check to be cut, etc. Some checking accounts pay interest, which lets you use your average daily balance to your advantage. However, most typical checking accounts, which are also called demand deposit accounts, do not pay interest.
Money market accounts give you interest and let you write checks on the account. A money market account gives you a higher rate of interest than a typical savings or checking account, but it also has a higher minimum balance requirement than other accounts.
Even though you can write checks on these accounts, it's not always easy to get your money out of them like it is with a checking account. Also, this type of account usually has more fees, which makes it a good choice for people who don't need to get to their money right away.
The savings account is another type of account that many people have. Most people keep the majority of their money in this type of account. Even though you can't write checks from these accounts, they do give you interest. You may have a limit on how many withdrawals or transfers you can make each month. If you go over that limit, you may have to pay a small fee.
There are also time deposit accounts, also called CDs or certification of deposits. These accounts offer guaranteed interest rates and let the account holder choose how long they want their money to be on deposit. Usually, you can choose anywhere from a few days to a few years.
This is a good choice if you want to earn a high rate of interest on a certain amount of money, but you don't want this type of account if you need to get to the money.
As you can see, you can choose from many different types of accounts. You must talk to the bank about all of your options before you choose one. If you're still not sure, tell them how you'll be using your account, and they'll probably be able to help you make the best choice for your money.
