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Types of Bank Accounts

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Let's go through some of the major types of banking accounts out there. A high interest savings account requires that you keep a certain amount of money (called a ?minimum balance?). If you withdraw more than the minimum balance calculation allows, the banking institution will charge you a fee. If, on the other hand, you maintain prudent spending habits, you win the privilege of higher than normal interest rates.

For something even more ambitious, consider getting a certificate of deposit -- a CD. This instrument allows you to save cash in a protected account for a set amount of time -- usually anywhere from three months to five years -- after which, you may retrieve your money and either return it to a new CD or put it towards savings or investments.

Banking CDs are considered safe investments -- but the money contained in the CD is illiquid. That is, you are not allowed to remove money form the banking account until the term expires. You may be able to collect some of the interest that you gain on the top of your lump sum deposit, but you can't change the terms agreed upon between you and your banking institution.

You can also find checking banking accounts. So-called regular checking is the most common mechanism used by consumers and small business. Basically, you maintain a balance in an account that can be used to pay creditors or bills as you see fit. Alternatively, you can opt for interest checking, which allows you to grow your account by a certain interest rate. Of course, you must maintain a minimum balance to qualify for this special service.

Some banking accounts will provide a safety mechanism called overdraft protection. If you ?bite off more than you can chew? and pay money out of your account that you don't have, your banking institution may cover you in exchange for charging you a special fee and interest on the remittance. Certain types of overdraft protection are considered privileged, while others are de rigueur for standard savings and checking accounts.

You may also link banking accounts to one another to provide supplemental financial protection. You can in essence provide your own overdraft protection, for instance, by linking together your checking and savings accounts to cover one another in the event of an overdraw.

Most institutional banking centers provide a litany of privileges and services for long-time customers. You can access info about your banking situation online at any hour, for instance. You can also transfer funds from one banking account to another, pay bills online, or utilize anti-fraud services to ensure the sanctity of your savings.

When evaluating your various banking account options, take into account your long-term financial perspective, your present budget (?spending plan?), your asset/liability cash flow, and your big picture financial goals. A banking representative or personal accountant can help you come up with numbers and logistical systems to keep track of various accounts and arrangements. Although doing the ?heavy lifting? of identifying and learning banking terms and conditions can be dreary, your financial legwork will pay off down the line and entitle you to much greater financial freedom.

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