As suggested by a study, 25% of Americans do not even own a bank account. In a world like today where most of the transactions are made online and COD (cash-on-delivery) system has become rather an outdated one, it has become extremely important for one to have his/her own back account.
Opening a bank account is not an easy job at all. There are different types of back account so we will help you look into these to make you figure out which one is your perfect match.
The following article will list down different types of bank accounts and tips to choose the right saving account for you.
Checking accounts grant you easy access to day to day deposits. Unlike other accounts, there is no specific limitation to the minimum account balances as long as you have enough money to cover all your purchases. It is one of the most commonly used type of bank accounts where users can pay their bills, pay off credit cards or debit cards. You also get a set of checks in your name to withdraw money.
Sometimes, checking accounts offer interest depending upon the amount of money you have in your account but it is usually lower than the one offered in case of saving account.
As mentioned before, savings accounts offer you more interest than checking account but as the name suggests, this type of account is solely meant for saving. Keeping this point in view, the user of a saving account is subjected to certain restrictions in terms of withdrawals and transfers he/she can make in a month. Normally, a daily minimum balance is also required. In short, by earning interest you get money in return of money. One thing which needs to be remembered is that the interest your account earn is considered income and therefore, it is taxable.
Money Market Account
This one is usually considered as a blend of saving and checking account. Banks typically offer a higher interest rate on money market accounts than on saving accounts. Normally, a user can make up to six withdrawals and transfers of a certain each month and the interest rate mainly depends on the amount you have deposited.
Certificates of Deposits (CDs)
This one is works fairly different than others accounts. What you can do with CDs is invest money for a particular period of time at either a fixed or variable rate of interest. Naturally, CDs with longer periods offer higher rate of interest. They are usually considered as one of the most appealing saving tools. However, CDs have withdrawals fees so every time you withdraw your money, you have got to pay the required fee.
Individual retirement Arrangements (IRAs)
It basically offers an easy avenue to save for retirement. There are two types of IRAs; Roth IRA and Traditional IRA. Roth IRA involve deposits made after taxes and are non-tax deductible while Traditional IRA contributions are tax deductible.
This type of account gives you a chance to make investments in stocks and bonds. You can also earn dividend payments. However, while going for this account, you need to know that the value of stocks can fluctuate meaning that you can be at a loss if you sell your stocks at a lower rate. If you want to earn more and are already a risk taker, a brokerage account might be your right choice.
We hope the above article has provided you with the necessary information. Do not wait any longer and open your desired account today to step into the future.