BRIEF BACKGROUND ON BANK ACCOUNTS

The concept of a bank has evolved over the years from a physical establishment into something that can be accessed with a single click. Nowadays, creating a bank account has become more convenient, since your choices are all laid on your screen. However, this easy access can cause confusion at times, so having an idea of each kind is necessary, along with being familiar of its process.

Account Types

Checking

This is the most basic type commonly used for everyday transactions either by electronic transfer or ATM. Also known as shared drafts, it does not impose limits on how many deposits or withdrawals you can make and normally does not have interests nor require a minimum balance. It has two types: personal and business. Since banks are aiming to attract more clients, a personal account usually does not need a maintaining balance and have no monthly fees. It is opened through your social security code plus, it also provides freebies such as debit cards and checks. On the other hand, a business type has fewer incentives to offer, but it has nearly the same functions. This one also uses your employer identification number instead if SSN.

Savings

As the name suggests, this one’s purpose is mainly for setting aside a bit of cash. It requires a certain amount to be able to open an account and monthly balance depending on the bank. You interst rate is highly affected by Federal Reserve Board’s decision, and you can only have six transactions every month. Aside from this, if you are planning to do a withdrawal, you may only either transfer the money into a checking account, use an ATM, or access it through a teller. There are different kinds of these as well such as educational or medical, but they all operate the same, varying only in label to help the customer organize his funds.

Dividend checking accounts

This is basically a combination of the first two accounts. Its unique feature is its interest-gain capability wherein you have to maintain a specific amount of money to benefit from interest or dodge charges. It also offers cards for easier accessibility.

Money market

Formerly, this kind is used for investment and trading, an is linked with the stock market but presently, it can also be used in saving especially if you want to get higher interest rates. They also have balance requirements and you use checks to write against it, with a limit of three per month and a minimum amount.

Certificate of deposits

It also allows you to increase your cash using interest but the catch here is your money will be locked for a selected span of time starting from three months up to five years and you cannot withdraw from it without penalty. During its maturity, you may either choose to renews the CD with its present rate or get the principal including the added interest you have garnered. This is deemed as most suitable for long term investments because it allows you to take advantage of the compounding concept.