As we looked into what are the different Bank Types, let us move to different Bank Account Types.
There are various bank accounts being offered by banks, Sometimes one account can be labeled with a different name, but they serve the same purpose.
Here are some basic bank Accounts.
- Checking Account /Debit Account
- Savings Account
- Money Market Account (MMA)
- Individual Retirement Account (IRA)
- Certified Deposits (CD) / Fixed Deposits (FD)
Checking Account
Checking accounts are one of the most common accounts. It is called by different names in different countries, such as in North America, is called Checking while In North America, it is called checking, in some other countries it is called debit accounts. With Checking accounts, you can deposit money and can withdraw and use instantly. Checking accounts provide checkbooks and they also offer debit cards (ATM Cards). Debit cards can be used at any location accepting online payments. You can also use it to withdraw money through ATM. Most checking accounts are free but there are some exceptions.
Now checking account is more a generic name, there are various versions of checking accounts, Some of the most common areas below:
- Personal Checking Account
- Business Checking Account
- Student Checking Account
- Senior Checking Account
Benefits of Checking accounts are as below:
- You can use them as online money
- use for online payments
- Use for online purchase
Savings Account
As its name suggests, saving account’s basic purpose is to save. Your money may not be in liquid form in a savings account and so this makes it somewhat difficult to get out cash on demand. You can not take out savings account money from ATM or purchase online items.
Benefits of savings accounts are as below:
- Used to build up savings over time
- More interest than checking account
- Not used to pay online or purchase making it more secure
Money Market Account
This account is more like a savings account but the money is being used for investment purpose by the bank and so they can offer more interest. Money market accounts get interested based on the current interest in the market. You are better with money market account if you have some money you want to save for the long term which also collects interest.
Benefits of the money market account are as below:
- FDIC secured investment
- A better approach for an amateur investor to start with
Certified Deposits
Certified deposits are also being called fixed deposits in some countries like India or indexed CD or an equity-based CD.
Individual Retirement Account (IRA)
This is a special purpose account made for your retirement. Anything you deposit in your IRA account is not being taxed until you withdraw it and once you withdraw, you pay at the current tax rate. If you withdraw before your retirement age, you not only pay tax but also some penalty. Your money saved in IRA has the option to keep in cash or invest in various investment options such as mutual funds or stocks.
There are two types of IRA, Roth, and Traditional. In Roth IRA you pay the tax upfront while in traditional you do not have to pay tax right now and will pay when you withdraw.
Some benefits of an IRA account are mentioned below:
- More savings as you do not have to pay tax
- Investment options such as mutual funds to individual stocks, options, money market, and REIT funds
- You invest in IRA before paying tax makes your overall tax on income less
In a Nutshell…
There are so many other types of bank account related to a niche customer base but for most people, above basic bank types are good enough. If you would like to go to any other Finance topic, go through this Personal Finance article.