TYPES OF ACCOUNTS

There are several different types of bank accounts Understanding them all can be difficult as each banking institution may offer a broad range of bank account types However most bank accounts fall into one of five categories By learning the different account categories you can make deciphering the choices offered at your banking institution much easier

Checking Accounts

Just like it sounds this account allows you to write checks against the balance you hold in your account as well as access your money through an automatic teller machine ATM It is a functional account best used for everyday expenses and not for longterm savings as it doesnt earn the highest interest rates available from bank accounts Most banks offer a myriad of checking accounts from which to choose

Saving Accounts

A savings account is another type of bank account that allows the holder to make deposits and withdrawals However savings accounts are not as flexible as checking accounts

Often holders of this type of bank account are limited in the number of withdrawals and deposits they can make each month Also savings account holders are not able to access their money with checks Many financial institutions allow savings account holders to make deposits and withdraw funds through ATM

Money Market Accounts

Most institutions offer an interestbearing account that allows you to write checks called a money market account This type of account usually pays a higher rate of interest than a checking or savings account does Money market accounts often require a higher minimum balance to start earning interest but they frequently pay higher rates for higher balances Withdrawing funds from a money market account may not be as convenient as doing so from a checking account Each month you are limited to six transfers to another account or to other people and only three of these transfers can be by check As they do with checking accounts most institutions impose fees on money market accounts

Time deposits frequently referred to as certificates of deposit CDs are bank accounts that require the account holder to make a deposit and agree to leave funds in the account for a specific amount of time In return for this agreement the financial institution pays interest to the account Often the interest paid on a CD is higher that the rate paid on other types of bank account The account holder is required to keep his or her money in the account until the specified term is over However some financial institutions allow account holders to withdraw interest without affecting the principal In some cases account holders may be allowed to withdraw their principal funds before their CD matures but a penalty is typically charged

Some financial institutions also offer basic nofrills bank accounts A nofrills bank account may allow the holder to pay bills and cash checks without paying the high fees associated with completing such transactions without an account An account of this type will likely allow for only a limited number of checks deposits and withdrawals to be processed in any given month In most cases interest is not paid on a nofrills bank account