The key to developing smart spending patterns is awareness. You should have at least a general understanding of how and when you are spending your money and why.
My Bank Offers Too Many Accounts! Which One Is Best?
These days, most banks offer a wide range of accounts to attract deposits from the general public. A bank account is a record of the financial transactions between a banking institution and a customer. From basic checking accounts to savings accounts to money market deposit accounts, banks offer a plethora of account options for you to choose from. Knowing your personal spending habits will help you find the best bank account for your particular financial situation.
Currently, the most popular type of bank account for consumers is the savings account. When you open a savings account, you deposit a certain amount of money and the bank pays you interest on it over time. The more money you save, the more interest ultimately will be paid.
Savings account holders can make deposits and withdrawals, but they can‚Äôt write checks. Also, some banks charge a fee if your account balance falls below a minimum. Another thing to keep in mind is that savings accounts typically yield a low interest rate in comparison to certificates of deposit (CDs) and money market accounts.
Before opening a savings account, make sure you ask the bank a few questions. Can you get an ATM card with the account? What's the interest rate? Will you get charged for withdrawals? Is there a "required minimum balance"? Be aware that a spending limit might apply. Also, be sure to make use of personal finance tools and a calculator to determine the costs that would be associated with having a savings account.
Basic Checking Accounts
Basic checking accounts offer a number of services at an affordable cost. With one of these acccounts, customers can make withdrawals, deposit checks and pay bills. Also, most banking institutions offer online banking services through checking accounts. Additionally, account holders are able to use paper checks to carry out day-to-day transactions, like making purchases or paying bills. A basic checking account is ideal for people who need a place to deposit cash and maintain a balance under $5,000.
Some banks offer unlimited transactions or unlimited debits at other banks' ATMs to those who open basic checking accounts. In these cases, customers are allowed to make as many deposits and withdrawals as they wish. If you only write a few checks a month, however, you will probably benefit most from a standard flat-fee checking account.
Money Market Deposit Accounts
Money market deposit accounts allow you to invest your money in certificates of deposit, treasury bills or commercial paper. They earn more interest than either savings or checking accounts, and they are perfect for customers who hold average balances of $5,000 or more and want to earn high interest rates. Their main drawback is that most money market deposit accounts require account holders to maintain a minimum balance in order to avoid fees and earn interest. Also, account holders are generally allowed to make only six withdrawals per month.
Certificates of Deposit (CDs)
Also known as fixed deposit accounts or time deposits, certificates of deposit are accounts that require customers to deposit a certain sum of money for a fixed time period. In return for this agreement, the bank pays interest to the account. Customers are required to keep their money in the account until the specified term is over. If they withdraw the funds before their certificate of deposit matures, a penalty is charged.