Personal Banking: Four Types of Bank Accounts

Every personal banking customer has his or her own needs when it comes to opening accounts. Some need a simple savings account to save money while others need more profitable saving options. As a customer, you have the right to choose any type of bank account as long as you meet the requirements. However, knowing more information about each type of account will help you choose the one that fits your circumstances.

Basic Checking Account

A basic checking account is the most simple type of account that allows customers a convenient and fast way of accessing money. A checking account is effective for people who write checks every month or do online bill payment. Once you open a checking account, you can obtain a debit card to make purchases, which will take money directly out of the account.

The benefit of a checking account is that most banks do not require a minimum balance and there are no limitations on withdrawals. However, checking accounts do not earn interest and you may be likely to pay certain account fees.

Savings Account

A basic savings account is an easy way of saving money and accruing some interest. Although high interest rates are rare, it is possible to earn a good amount of money if your savings is large enough.

The disadvantage to savings accounts for most banks is that customers have a limit on withdrawals and transfers. Additionally, customers may be subject to fees and will have to maintain a certain balance every month.

Money Market Account

A money market account is a combination of both a checking and savings. While you cannot withdraw money from a savings, you can with a money market account. At the same time, you can earn interest on a money market account with the benefit of higher interest rates.

A minimum balance is required when this account is opened and this balance must be met on a monthly basis. Generally, this minimum is anywhere from $500-$1,500. Customers can also transfer money with certain limitations and write checks. The downside is that customers may be subject to certain account fees.

Certificate of Deposit (CD)

A certificate of deposit account is similar to a savings account but offers customers a higher interest rate. The difference is that customers must save this money for a specified term. The way a CD works is that the more money is placed into the account, the longer the term becomes and the higher the interest rate is.

The drawback of a CD is that customers cannot withdraw money from the account until the term ends (date of maturity). If a customer chooses to withdraw funds before the date of maturity, there will be fees. The advantage is that CDs are the highest interest earning accounts to invest in and funds are insured by the FDIC.