Overview
In this tutorial, we will learn about the different types of bank accounts. A bank account is a financial arrangement between an individual, business, or entity and a financial institution, such as a bank or credit union. It is a secure place for storing and managing funds and conducting various financial transactions.
Types of Bank Accounts
Savings account
A savings account is used to save money over time. It offers interest on the deposited funds, has withdrawal restrictions, and may have a minimum balance requirement. Savings accounts are designed for people who want to deposit their money in a safe place and earn interest simultaneously. A savings account comes with a checkbook, debit card, and online banking access.
Checking / Current account
A checking account is intended for business people. It is used for daily financial business transactions and allows frequent deposits, withdrawals, and payments. Banks may charge a fee for checking accounts.
Money Market Account
A Money Market Account is a hybrid account that combines the features of savings and checking accounts. It generally offers higher interest rates than regular savings accounts and may have limited check-writing capabilities. It is similar to checking accounts that earn higher interest and require a higher minimum balance.
Certificates of Deposit( CD )
Certificates of Deposit are savings deposits that require you to keep a certain amount of money in the bank for a fixed period. They are ideal for longer-term savings with a fixed interest rate. A CD requires the account holder to deposit a lump sum for a specified term – for example, six months, one year, five years, etc. and penalties may apply for early withdrawals.
Joint Account
A Joint account is a shared account between two or more individuals. All the account holders have equal access to funds and joint responsibility for account management.
Custodial Account
A custodial account is a bank account managed by a parent or guardian on behalf of a minor. Once the minor reaches a certain age (as defined by the account terms), they gain control over the bank account.