Savings, Checking or Certificate of Deposit Account: Choosing the Best Banking Option
What do you want to get from your savings? Why do you need a bank account to deposit your hard-earned money? Are you depositing money for a short-term goal or want to buy something big in future? Answering all these questions will help you determine the right banking option for you. It’s a very tough decision when it comes to deciding which banking option is right for putting your money. Here are the three types of banking accounts mostly used by customers:
Savings account: It is the most secured and safe way to grow your balance. A savings account is one which is not required for your daily expenses but you can withdraw money in case of emergency. Some banks charge monthly maintenance fees if your savings account has minimum balance left and your monthly transactions are higher than those set by the bank. There are different types of savings accounts including instant access saving account, regular savings account, fixed-rate bonds, and notice savings account. Tip: If you’re a taxpayer, ask the bank to have your account interest paid gross when using savings account.
Checking account: Checking account helps keep your cash secure while offering you easy access to your money for daily transactional needs. Checking accounts usually have no or less monthly maintenance fees as compared to savings account. It allows unlimited deposits and withdrawals. You can use checking accounts to set up an automatic payment system for paying monthly expenses. You have two options while opening a checking account - interest-bearing checking account and basic checking account. Tip: Ask your financial institution to provide overdraft protection.
Certificate of Deposit (CD) account: If you want to earn higher interest rates on your deposits and are willing to give access to your money for a certain time period, then you should go for CD account. CD account is a special type of deposit account with a bank or financial institution. You can earn higher interest rate for the money deposited in your CD account for a particular investment period as compared to checking account. The most common types of CDs are Traditional CD, Liquid CD, Zero-coupon CD, Callable CD, and Brokered CD. Tip: Interest rates help you determine how much time you should tie up your money. Community banks usually offer best CD rates but pick your CD account type carefully to earn highest returns.
There are two other types of banking option - money market account and individual retirement accounts (IRAs). Once you understand the types of accounts offered by banks, you can better determine the right option for you. Determine your savings goal and understand the benefits offered by each bank account before making the final decision.
