Does Your Bank Look After You?

The banking industry offers a wide range of different consumer current accounts and each of them will be slightly different. In the US however, most everyday accounts fall broadly within five categories and these offer different pros and cons depending on the customer’s own individual circumstances.

A checking account is the most basic and traditional type of the current accounts available and uses checks primarily for withdrawing money. You can pay bills, buy things and give money to anyone you like and use a check to transfer money to a bank account held with another financial institution.

Usually, account holders are free to make as many withdrawals and deposits as they like, either via a branch or an ATM.

These types of basic account are ideal for every day money management and for carrying out transactions throughout the course of a month. They will offer easy access and may even have additional incentives such as promotional joining rates or offers, or preferable rates on tied products with the same institution.

However, their interest rates are likely to be very low and overdrafts and fee rates should be checked and compared carefully against other providers.

A savings account is a bank account that also allows deposits and withdrawals, but these may be set at an annual limit. The point of a savings account is primarily to deposit money in it and allow it to grow, with the benefit of interest payments over time. A savings account holder can’t access their money with checks, although many banks allow transactions to be managed via ATMs.

Another bank account is the money market account. It offers interest at higher rates than with checking and interest-bearing savings accounts, however they generally require a minimum balance to be held on the account, which tends to be higher than with other checking or savings accounts.

Withdrawals are also limited to six a month, on average and a maximum of three of these can be done by check.

Time deposits are also known as certificates of deposit and are accounts where the account holder deposits money into the account and agrees to leave it in there for a certain amount of time, in return for a higher rate of interest than with other accounts.

Some institutions allow interest payments to be withdrawn during the term as long as the principle isn’t touched, but others will charge penalties, especially if the principle fund is withdrawn before the end of the specified term.

There are also no frills basic accounts that avoid the high fees that can come with some bank accounts. These tend to be limited for certain low amounts of deposits, withdrawals and checks within a single month and generally, interest won’t be paid.

Increasingly, many bank accounts are also offering online banking, which is a bonus for customers who find it difficult to visit a branch in person. These accounts sometimes offer better interest rates and bonuses too, thanks to their lower operating costs.

With all current accounts, it’s worthwhile doing a comparison of what’s available before opening up a new account. Use a price comparison site or speak to an independent advisor to find out what’s right for your individual circumstances.

Look beyond gimmicky and promotional offers on current accounts and find the underlying costs and benefits that make up the account – interest fees on credit balances, fees on transactions or penalties and the specifics that govern how you can access your money and when.

It’s also very important to make sure your credit record is strong so that you can access the best bank accounts. Those available to people with poor credit ratings tend to be less attractive in general and with stricter provisions on withdrawals and overdraft facilities.

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