Did you recently see a commercial for that bank down the street that is offering that 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
Checking accounts are usually the accounts that you see offered on those commercials. 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.
These accounts are a great choice for those that need to have access to their money without having to jump through hoops or wait for a check to be cut, etc. 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 are those that offer interest on the accounts but also allow 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.
While you can write checks on these accounts, withdrawing funds isn't always as simple as it is with a checking account. 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.
Savings accounts are another common type of account. This is the type of account that most people use to keep the bulk of their money in. These accounts offer the benefit of interest though you do not have the benefit of being able to write checks from the account. 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.
In addition 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.
This is not the type of account that you want if you need to access the money, but if you want to earn a high rate of interest on a specific amount of money this is a great choice.
As you can see, there are many different account types for you to choose from. Before you sign up for one, you should ask your bank about all of your options. 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.
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Source: www.articlecity.com