Which Type of Bank Account Should You Open

Chapter 1: Where To Open Bank Accounts
Chapter 2: Which Type of Bank Account Should You Open
Chapter 3: Bank Account Interest Rates
Chapter 4: Bank Account Charges and Fees
Chapter 5: Online Banking
Chapter 6: Bank Account Facts

Which Type of Bank Account Should You Open

Banks offer various types of checking and savings accounts that come with a lot of features and specific rules and conditions. Here are a few things you should look for while choosing a bank account:

  • Consider the balance you want to maintain in your account. Many banks offer an account with a high rate of interest, checking facility and zero monthly fee, provided you maintain the required minimum balance or more.
  • If you are maintaining an account with no fees and no minimum balance, you may not be allowed a checking facility or may have a limit on the number of checks you can write. If you need to write a lot of checks for your business or any other purpose, look for a checking account with nominal fees.
  • If you use the ATMs frequently and are web savvy, select an account that provides an ATM card and has the online banking service.
  • If you want a checking account, savings account and also a mortgage from the same bank, see if the accounts can be linked for easy transfer of money.

Choosing The Right Type of Bank Account

Banks offer different types of accounts for different purposes and for different age groups. You can have a checking account, a savings account, and also accounts for senior citizens, college students or people with low incomes. Here are some of the different types of accounts that banks offer:

Checking Accounts – With checking accounts, you can manage your money more efficiently. You can write checks for your bills and other financial transactions and easily access your money with an ATM or Debit card that comes with this account. However, they come with a minimum balance requirement and low or no interest payments. Hence, a checking account is ideal only to hold the required amount of money for your daily transactions, but not your savings.

Savings Accounts – Having a savings account is a must when you want to save money regularly. The advantage of this account is that there is no minimum balance requirement but the disadvantage is that you may not have the facility to write checks. The interest paid on this account is usually the same or lesser than the interest paid on other accounts.

Money Market Accounts – A money market account is a savings account with a checking facility, a higher rate of interest and a higher minimum balance requirement. As long as you can maintain the required minimum balance, no fee is charged. But if you cannot maintain the required account balance, you may not be able to make the best of the high interest rate offered on these accounts.

Certificate of Deposit – Certificates of deposit, also known as CDs, are timed accounts offering a high rate of interest. The money you put in this account is locked for a specific duration and you are not allowed any withdrawals until the tenure ends. In case you do need the money for an emergency, before the end of the CD, you can withdraw the amount after paying a penalty.

Overdraft Protection – Overdraft protection or a cash reserve account has a margin amount or a line of credit that does not allow you to overdraw from your account. Apart from having a line of credit, you can also link your savings account to the overdraft account and enable automatic transfer of funds to avoid an overdraft.

Next Bank Account Interest Rates