Banks allow the users to open different types of accounts though five of them are most common and usually provided by all banks. These five make the subjects of this write-up. It is likely that a particular bank in which you are going to create an account will not impose any restriction upon you in regards to choice of account. However, it always makes sense to take a decision about an account before visiting different banks.
Let us now proceed to brief description of the five most common bank accounts.
Opening this account is justified if you are focused on saving money. Writing checks is usually not allowed though you can deposit and withdraw amount. Rate of interest is higher on savings account if compared with that on a checking account. However, interest on saving account is less than what the banks offer on CD or market account. You will get a passbook in some savings account and all transactions are recorded in that. You have to incur a fee if your balance dips down a particular figure.
CDs or Certificates of Deposits
It is commonly referred to time deposit. While opening such account, you need to agree to keep the sum for a particular length of time, usually from three months to six years. The account holders enjoy a higher interest rate as money is accessible throughout that agreed time span. The rate of interest increases with increase in duration of deposit. You have to pay a fine of substantial amount if money is withdrawn before the date of maturity.
Money Market Deposit Accounts
These accounts allow you to put your balance in short-term debts like treasury bills, CDs or commercial paper. The interest rates could be a little higher than what is received on those checking accounts. However, the minimum balance is usually higher in such accounts to produce interest. Only limited check writing is allowed and you are required to pay a service fee if balance drops beyond a certain minimum.
Basic Checking Accounts
Also referred to as “no frills” accounts, basic checking accounts provide a few cost-excellent services. The account holders enjoy some privileges like check writing but some features of comprehensive accounts are also missing. These features include interest payment, imposition of additional fees for writing more than a specified number of checks in every month and other excessive activities.
Interest-Bearing Checking Accounts
These accounts give you a set of more comprehensive services and those are not coming cheaper. You have a privilege to write an unlimited number of checks. Interest paying checking accounts are also known as NOW or negotiable order of withdrawals. Rate of interest depends on the size of the balance and most of the banks charge a fee for monthly service if balance falls below a specified limit.