The Different kinds of Bank Acounts
Checking / Current Acounts
People tend to use the term Current Acount more than checking acount however they are really officially called checking acounts. As the name suggests a checking bank acount allows a customer to write checks against a deposited balance in the acount.
In addition to the checking facility most modern checking bank acounts provide a debit card as a alternative to a cheque book as this is a more cost effective method of transacting payments for the bank owner.
When a checking acount is combined with a line of credit or more commonly known as a overdraft it then becomes a little more than just a checking acount and the term current acount becomes more accurate as a name.
An unofficial definition of a checking acount is; an acount that allows you to deposit your money and withdraw either directly as cash or pay for goods and services by cheque or debit card.
Some current acounts pay interest on positive balances similar to a savings acount, however the rates tend to be lower than an actual savings acount. In addition most banks will offer a FREE current acount without a monthly charge, although interest rates will probably be lower and charges for other activities will be higher.
Savings Acounts
As the name itself implies, savings acounts are specifically for people to deposit money and build savings. These acounts usually do not have the same facilities that a current acount has and in exchange for this they pay more interest on the debit acount balances.
You will usually not find a savings acount with a cheque book or debit card, however many banks offer an ATM card on their savings acounts allowing you to withdraw money from their cash machines. Again this is done to help reduce the costs of transacting money as ATM’s are cheaper to run than a counter service.
Savings acount can sometimes have a minimum notice period to be able to withdraw money from the acount.
With the growth of the Internet and the facility to participate in internet banking, many banks offer internet savings acounts that are controlled solely online and do not provide the facilities if you were to go into a branch.
Money Market Acount
A money market acount is a little like a savings acount and will pay interest on positive balances. The rates of interest are usually higher although acounts usually have restrictions on the number of withdrawals that can be made in a month as well as the types of withdrawals. In addition most money market acounts will have a minimum required balance that the acount has to maintain to receive the higher rates of interest. Higher rates of interest are achieved by the bank as they specifically use a customer’s deposited money to invest in money markets, therefore making profit from the money within the acount. This additional profit is given back to the customer in the form of higher interest rates.
Time Deposit Acounts
Time deposit acounts are specifically designed for the saver who does not need to get their hands on their money for fixed period of time.
Depositing money into a timed deposit bank acount will mean an agreement that you will leave the money in the acount for a fixed period of time. This leads to a much higher rate of interest as the bank knows that it has your money to use for investment for a minimum period allowing the bank to plan their investments and make more profit from them. Again, in turn, the reward to the customer for letting the bank make more profit from their held monies is the return of a higher rate of interest.
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