Types Of Bank Accounts

Types Of Bank Accounts – What Account Type Do You Need? Are you seeking to open an account with the bank but you do not know the type of account you should open? You are not alone in this because many persons encounter this challenge too. Most people are stuck with this situation too because the needs when it comes to opening an account differ from person to person, what one person needs in an account might be very different from what another person needs, and this sometimes makes it a bit difficult to give a precise choice when it comes to choosing a bank account that best suits you.

In this article we will put you through the types of accounts that are available, thus, it will be a guide to determining the particular account that you need. Top 4 Advantages of Online Banking

Types Of Bank Accounts:

In this read, we have highlighted the five major types of accounts suitable for both individuals and organizations.

1. Checking Account

This is a type of account that makes access to your money quite easy so that you can carry out transactions when you want. This kind of account helps you to keep your money secure, those who hold this type of account have the liberty of using their checks or debit cards to pay bills or make purchases.

This type of account has different options when it comes to helping customers avoid excessive monthly bills. However, before opening a checking account, you must compare the benefits of different checking accounts to compare and then balance it up with the kind of service that you need.

2. Savings account

Having a savings account gives you the leverage of getting huge interest when you save up money for the needs you may have in the future. On a savings account, the rate of interest is usually accumulated on a daily, weekly, monthly or even yearly basis.

There are several types of savings accounts based on certain features such as interest rates, service fees and monthly services. Before you open a savings account, however, you must understand the terms and conditions of the bank so that you are fully aware of where you are investing your funds and how beneficial it would be to you in the long run.

3. Certificate of Deposit (CD):

CD or Certificate of Deposit is a type of account that allows you to put away your funds at a fixed interest rate for a particular period. It is more like a fixed deposit where you get to deposit your money for a certain period without having to touch it. The period you can fix for your deposit ranges from a few months to many years. The interest rate on this account is usually on the high rate compared to the savings account and this happens because the funds you deposit in this type of account are subject to the terms of the contract of Certificate of Deposits.

In choosing this type of account, the most important thing is to ensure that there would not be a situation where the deposited funds would be needed because due to the nature of the deposit, in the case where you use the funds before the stipulated time, you may be subjected to some financial penalties. This is why you should duly consider the options before opting for this account. Types Of Bank Accounts

4. Money market account:

Money market accounts have almost the same features as savings accounts, it only differs in the sense that on the Money market account, it is expected that you have a higher monthly balance on your account so that you can waive the higher interest rates that may be accrued to the account in case of default. Money market accounts have interest rates that may weary you out but when you have a higher balance in your account, the account will be favourable to you.

One other feature of the Money Market Accounts is that some of them give you the leverage of writing checks against your funds, however, this may be on a limited basis.

5. Individual Retirement Account (IRA):

The Individual Retirement Account is an account which allows you to save on your own, the way you like with your retirement in mind. It is important and useful that you open this kind of account especially if your employer doesn’t give a 401(k) as well as a qualified employer-sponsored retirement plan (QRP), which includes 403(b) and governmental 457(b), or in the case where you may want to save more money than what your employer-sponsored plan allows you to.

Types of IRA Account

The IRA account comes in two types which are; the Traditional IRA and the Roth IRA. The Roth IRAs give the potential for tax-free growth. The earnings on Investment are shared upon retirement without accruing tax in the case that the account was funded over five years or more and it happens that you are up to or above 60 years of age, you are using an exception of a first-time home buyer or you’re disabled or in the case of death, the payment is made to your beneficiary.

Traditional IRAs give a tax-deferred growth potential. In this case, you do not pay any tax based on your investment earnings until the point when you withdraw or “distribute” the funds from your account, presumably in the event of retirement.

The two types of IRAs offer a level of tax advantage, and investment flexibility, as well as the same limits of contribution. It is advisable that before you opt for this account, you should discuss the option with your tax advisor.

Conclusion:

In summary, these are the available types of accounts. In consideration of the account to open, you should think first
of the pros and cons of each of these accounts before you make your choice. You should choose an account that makes your financial goals achievable within the stipulated time frame.

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