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Understanding Bank Accounts

There are several different bank accounts to choose from, and your needs will determine which are the best bank accounts for you to open. Finding the cheapest bank accounts available to you is a great way to help you use your money without losing it. Before you decide which are the best bank accounts for you, you need to know what the different account types are and what they can do for you. Checking Account This type of account works best if you plan on using it for making transactions and want to be able to easily move money in and out of it. Many employers require that you have a checking account so that they can pay you using direct deposit. Receiving direct deposit is one of many ways a checking account is useful. Nearly every bank will also allow you to get a debit card for your checking account which allows you to make purchases everywhere that credit cards are accepted using money directly from your checking account. These are the best bank accounts for using the money you have to make purchases. Savings Account A savings account is designed specifically to help you save money, so withdrawing money is usually a little more difficult and requires a trip to the bank, or using online banking money transfers. The main difference between a checking and savings account is that your savings account will accumulate interest over time, which helps your savings grow. Some savings accounts have minimum balances, monthly fees, and nearly all of them have different interest rates, so make sure that you find a savings account that will help you save your money. Certificate of Deposit A certificate of deposit account (CD), is similar to a savings account in that you accumulate interest, but because of the way they’re set up, you usually get a higher interest rate. CD accounts require you to keep your money in the account for a certain amount of time to get the benefits of the CD. You can find CDs for months or years, which means you can easily find one that works for you. The only drawback of these accounts is that you can’t take out your money early or else you will have to pay penalties. Other Types of Accounts There are two other common types of accounts which also work similarly to the a savings account. A money market account has higher minimum balances, and variable interest rates. These interest rates are based on the money market, and you can often get a higher interest rate by having a higher account balance. The other common type of bank account is an Individual Retirement Account (IRA), which can help you save for retirement whether or not your employer has a retirement plan. You can get a traditional IRA which lets you take tax deductions for your contributions to the account, or a Roth IRA which lets you withdraw funds without taxing them. Once you have an understanding of these common types of bank accounts, you can decide which is the best bank account for you and which will be the cheapest bank account for you to save and use your money.

Remember ...

A certificate of deposit account (CD), is similar to a savings account in that you accumulate interest, but because of the way they’re set up, you usually get a higher interest rate. 
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