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Banking & Savings
Types of Bank Accounts |
When shopping for a new account, you'll
find there are an increasing number of ways to manage your money. Banks offer a wide range
of checking and savings accounts. Some are basic. Some pay interest. Others do not.
So what type of account is right for you? The answer depends on a number of factors:
- Why do you need the account?
- How often are you going to write checks?
- How often will you need access your money?
By answering these types of questions, you'll be able to establish a few criteria for
picking an account.
The following list provides a good starting point for your analysis.
Checking
Checking accounts offer you a convenient way to pay for bills and other expenses. Some pay
interest if you maintain a minimum monthly balance. Others do not. Whatever your
requirements, you should be able to find an account that meets your needs. There are many
to choose from.
1) Basic Checking Accounts. Also known as a "No Frills" bank
account. With this type of account, you get a limited set of services for a small price.
You may be charged a fee for each check you write over a certain limit or you may just be
charged a monthly fee. Some banks will require you to set up a direct deposit or
maintain a minimum balance in order to avoid a monthly fee. Basic checking accounts
normally don't make interest payments to their customers.
2) Interest-Bearing Checking Accounts. The higher balance you maintain in
these type of accounts, the more interest you will earn. If your balance drops below a
preset level, you'll be charged a hefty monthly service fee. Interest-bearing accounts
normally offer unlimited check writing privileges as long as you comply with the
requirements.
3) Money Market Accounts. Money market accounts normally invest in
short-term obligations such as commercial paper, CDs, or Treasury bills. These type of
accounts usually pay a higher rate than checking or savings accounts and a lower rate than
CDs. Rates vary according to current market conditions. Money market accounts are
different than money market funds for several reasons. First, they are insured by the
FDIC. Second, money market accounts are not charged the normal management fee that funds
will incur. Money market accounts also place a tighter limit on check-writing privileges
(often just 3 per month). They may charge you a maintenance fee if your balance drops
below a preset level.
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