A bank account can be defined as a financial account between a financial institution and a bank customer. It is a channel through which a customer can entrust a bank with his/her funds and make withdrawals when need be. Banks usually offer different types of banking accounts to their customers without restricting their choice for a particular account type. It is quite interesting to know that there are different bank account types but understanding them all is not a walk in the park. The following are basic banking account types offered by a majority of banking institutions worldwide.
This is an account that offers you comfortable and secure access to your account, especially if you need some to money to cater for your transactional needs on a daily basis. It is a primary instrument used by majority of people for withdrawing their funds. With this type of a bank account, you can transfer funds from your checking account to another bank account in a different banking institution. Majority of people consider it as the most economical bank account type because it lacks monthly service fees.
The savings account is another bank account type that allows the account holder to amass interest on the funds deposited for future use. Interest is compounded on weekly, daily, annual and monthly basis. However, a savings account is not as flexible as the checking account because holders of savings account are limited to the amount of deposits and withdrawals they can make on monthly basis. Banking institutions do not allow holders of this bank account type to access their funds with checks. However, they are allowed withdraw and deposit money through their ATMs.
Certificates of Deposit Accounts (CDs)
A CDs account is in most cases referred to as Time deposit account. As the name suggests, a CDs account provides you with a platform to only invest your funds at a pre-set interest rate within a pre-set of time period. This means that you should agree to leave your funds in the account for a specific amount of time. The best thing with CDs accounts is that they have relatively higher interest rates compared to the traditional savings account. However, it is not one of the best bank account types you should open if you would like to access your money any time.
Money Market Bank Accounts
This bank account that has a few similarities with savings account but it requires you to hold a certain minimum amount, otherwise you will be charged a monthly fee. This minimum is also required for your money to earn interest which is normally higher than that imposed on checking and savings accounts. Majority of money market accounts allow its holders to cash in checks against their funds but on fixed basis.
Individual Retirement Accounts (IRA)
This type of a bank account lets you to save on your own for retirement. It is the best alternative if your employer doesn’t provide a retirement benefits scheme or if you would like to save some more money for your retirement. Individual retirement account comes in two other types namely; Roth IRA and traditional IRA. However, the former is more popular because cash withdrawals can be done tax-free.