Our modern life depends on bank accounts on so many levels. Whether it is to save money or get salary on monthly basis, it has become one of the most convenient methods of survival. On top of that, it is an easy and simple method when it comes to the withdrawal of money with the help of debit cards. You can even earn more money with the help of interest policy followed in bank accounts. In order to prevail any of the services, you need to know the different type of services that are available. We have summed up different types of bank accounts that are used by customers around the globe.
- Transactional Account/Checking Account
It is a type of account that works on basic principle. In simpler words, one can easily deposit check, pay bills and withdraw some amount as per their requirement. This type of account is the one that stores money with the intention of spending amount. In the present time, debit cards are used in place of checks for this type of account making it convenient to avail. However, there is no interest rate in such accounts but there are overdraft fees penalties.
Why use it? – This type of account is used by the customers who depend on cash or checks while keeping a small amount in their bank account. On top of that, there is an option of check card for customers.
Downsides – There are different types of fees that fall under such structure that limit the use of checking account due to its expensive nature. in addition to this, there are different accounts in which it is essential to have limited balance stored in an account.
- Saving Account
As the name suggests, it is a type of account that promotes saving amount along with interest. This type of bank account allows one to earn some per cent of the money for saving the amount. The interest rate can differ as per bank conditions and terms policies. It is an amazing way to save some account in case of an emergency.
Why use it? – It is a good option when it comes to adults that are saving for future ventures or kids that want some extra cash for college fees.
Downsides – The only fall out of this type of bank is that it works on low-interest rates when it comes to another type of accounts. On top of that, there are no options such as a debit card that allow easy withdrawal of money.
- Money Market Account
Another type of bank account that is famous when it comes to saving money on the business end is – Money market account. In this, one can save their amount with a limitation of minimum balance in an account. On top of that, there are higher rates of interest on comparing money market with saving accounts.
Why use it? – If you are one that has can have minimum balance as per bank requirement, that might be more than $5000, then it is an ideal option. On top of that, it is the best way to earn a higher amount from the rate of interest.
Downsides – The main downside is the minimum balance that is required in Money market account. The amount is extremely high that makes it difficult for an individual to maintain it with limited withdrawal number that might be thrice a month.
- Retirement Account
This type of account is the most used one due to its tax advantages. This type of account saves a lot of amounts that one might be paying for the interest in income tax. However, the payment on taxes can be done after some time. But it is an effective way for long terms saving. Especially when it has Roth IRAs and Traditional IRAs options available.
Why use it? – It is one of the ways to save some amount for the future. This also makes it easy for one to save money with a larger amount saved for long-term.
Downsides – If you are getting any kind of tax benefits then there is always a catch. Here, there might be some agreement clauses that can be a drawback. So, be clear about it and clear queries with CPA and banker. It is also possible that one has to wait for some time before they can access that amount. There can be penalties or taxes for early withdrawal.
- CD – Certificate of Deposit
It is a way to earn more by keeping a certain amount in the bank over time. For instance, there are different types of CD accounts. So, if you are using 12 months of CD account the total amount will be locked up for the next 12 months.
Why use it? – It is best if one has a certain amount that will not be used soon. It can be locked up in the CD account for interest work.
Downsides – There is a penalty of a certain amount, as per bank policies, if one has to withdraw the amount.
- Current account
This type of account is mainly for the companies, firms, business, enterprises, etc. in which there is no involvement of saving or investment. In this type of deposit, there is no limits when it comes to the transaction of money making it liquid deposits. In addition to this, one doesn’t have to pay any type of charges for service or for amount held in it.
Why use it? – This account is best when you are planning to open up a business or already have a running firm. It is the best way to store money without any charges.
Downsides – The only downside of this account is no fixed maturity. One only has to pay interest but they won’t have any major benefit in return.
- Recurring deposit account
This type of bank account is the one in which one can have associations, joint account, institutions, clubs, single, etc. It is best if one wants to save some amount of money in their account and have the benefit of return on a higher rate of interest. An individual has to pay a fixed amount of money in their account for certain time spam. It mainly starts with six months and goes till 10 years. You can easily do it through online banking or by visiting bank branch.
Why use it? – If one is interested to open an account with the intention of saving some amount then it is an ideal choice.
Downsides – The downside is that there is no alteration when it comes to instalment number of amount. One has to pay up the amount quarterly in terms of a scheme that is payable.
- Fixed deposit account
As per the name suggests, the bank account has a fixed amount of money for certain time spam. One can only withdraw or deposit the amount only once and hence, there is no withdrawal of money until the expiry period. The rate of interest for the deposit is fixed and higher as compared to others.
Why use it? – If you have the intention of saving some amount of money then this is an ideal condition to follow.
Downsides – It is not ideal if you might want to claim the amount prematurely. This will result in a penalty and one has to suffer due to it.
- Demat Account
With the evolvement of electronic settlement, the Dematerialized account has gained a lot of popularity. It has become one of the major game changers in terms of shareholders working task. This type of account is used for transactions on the electronic level for different trades. In this, a user receives or generate a password over the internet in order to maintain their transactions. The transactions are completed and confirmed automatically with the help of this password.
Why use it? – It is ideal for the trading purpose where security is the topmost priority for the user. Here, one can easily initiate the transaction work for sales and purchase.
Downsides – There are a few hitches when it comes to security in the dematerialized account. There is also a different type of agreements that are asked in order to get approval from the user.
There is simply so much about bank accounts that allow an individual to work efficiently with their money. It is an easy way to be updated about the amount and earn from money. However, if you are choosing an account or have to open one then there can be different account for them as per their requirement. So, be sure about your requirement and opt for the one.