08 Sep 2020   /   0 comments

Breaking Down the Different Types of Bank Accounts

Paul

According to one study, about 25% of Americans don’t have any type of bank account, or they don’t have enough money to put into a bank account.

If you’re part of the minority of Americans who don’t have a bank account, you should really look into opening one.

There are all kinds of types of bank accounts that you could open, but we’ll break them all down for you so that you can decide which one is right for you!

Savings Account

A savings account might be one of the more popular options that people open. Some people even have a savings account opened for them as children because their parents wanted to start saving for them.

A savings account is normally the first interaction you have with a bank, and it will help establish you as a member there. A savings account is also a great place to put the money that you want to save. For doing this, you’ll actually get rewarded!

Most savings accounts will pay you some percentage of interest on the money that you have in their account. It’s kind of like a “thank you” for banking with them.

This bank account is good for anyone who wants to try and save up some more money while also earning money back. However, the drawback is that the money you make on a savings account might have lower rates than what you could get elsewhere.

Checking Account

A checking account is probably the second most popular bank account type.

With a checking account, you can deposit your money in there and use it to pay your bills, pay off your credit card, or use your debit card for everyday purchases.

Normally with a checking account, you’ll also get a set of checks in your name where you can withdraw money.

Some checking accounts do have a fee that you have to pay if you don’t have enough money in the checking account, so you should make sure you read all of the fine print before you sign up for it.

Checking accounts will occasionally offer interest on however much money you have in there, but this rate is normally lower than what a savings account would offer you. For this reason, it’s financially smarter to leave your money in a savings account if you’re not going to be using it.

Money Market Account

A money market account is normally like a savings account, but you’ll have to save more money in here. They normally require a minimum balance that you have to keep in there, or you’ll be charged a fee.

However, the rates of how much interest you’ll get back are determined by a tiered interest rate. This means that if you have a higher balance, you’ll be able to have a higher rate.

With some money market accounts, they’ll also provide you checks so that you can withdraw money from this account.

Brokerage Account

If you are looking to invest your money rather than letting it sit in a savings account, you could open a brokerage account.

Through a brokerage account, you’ll be able to put your money to work by investing it in bonds and stocks. To make money, you should research stocks and try and buy them when they’re low. Once you do that, you’ll be able to sell them when they’re higher.

In addition to investing in stocks, you might be able to earn dividend payments as well.

However, brokerage accounts might be the riskiest account you could open. The stock market fluctuates all the time, so you could end up losing our money if you sell your stocks for a lower price than what you bought it.

For this reason, you shouldn’t use this account to store your savings or spending money.

Certificate of Deposit Account

A Certificate of Deposit (CD) account will hold your money for a fixed set of time. For example, some people might keep money in there for one month. Others might keep it in there for one year.

Depending on how long you decide on, you’ll have to keep it in there for a while until it reaches that time period. These are great accounts for people who have a hard time keeping their money in a regular savings account.

IRA Account

An Individual Retirement Arrangement (IRA) account is also kind of like a savings account, but it’s not as risky as a brokerage account is.

An IRA was created so that people could use it as a way to save for retirement. You can put $6,000 in here each year if you’re under 50 years of age. If you’re over 50, you can put in an additional $1,000 a year.

When you set up an IRA, there are two different types that you could set up.

A Roth IRA is not tax-deductible, and you make the deposits after you’ve paid your taxes. With this IRA, you don’t have to be a certain age to be able to withdraw money from your account.

A traditional IRA is normally tax-deductible. However, that means when you withdraw money, that will also be taxed until you reach a certain age.

Learn More About the Different Types of Bank Accounts

These are only a few of the different types of bank accounts, but there are many more options out there.

We know that it can be overwhelming when it comes to managing your money, but we’re here to help you.

If you’re struggling with loans specifically, you came to the right place.

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