The Different Types Of Bank Accounts: Explained

There are many bank accounts to choose from, and it can be hard to figure out which account is the best for you. This post will try to explain the different types of bank accounts that exist so that you can make a more informed decision when choosing your bank account.

Types Of Accounts

There are many different bank accounts to choose from, and it’s important to understand what they are before deciding which one is right for you.

The different types of bank accounts: explained

There are two main categories of bank account: interest-bearing bank accounts and transaction bank accounts. You should first decide whether your bank account will be primarily earning or spending money. This decision will help ensure that the type of bank account you select can meet your needs while staying within your budget parameters.

This blog post was written by a professional blogger in order to provide information about the types of bank accounts available in today’s market. Make sure to also read this article to help you answer any questions you might have regarding the accounts you could open in Canada. This way, you can make the best bank account decision that will help your bank balance stay as healthy as possible.

Here’s a list of bank accounts:

  • checking accounts
  • savings accounts
  • money market accounts
  • certificates of deposit

Checking Accounts 

Checking accounts are bank accounts that allow the customer to make withdrawals, deposits, and transfers; they are typically used by people who do not have a lot of money or those who wish to keep their money in several different places at once.

In order to open up a checking account with most banks, you will need an active bank account along with government-issued identification (i.e., a driver’s license). You also might be asked about your employment situation as some banks require proof of income before opening an account. Once this has been completed successfully, then you can start making transactions using your checking account! 

The bank account is the main tool used by people to keep their money separate from other bank accounts they might have. Many individuals use checking accounts as a way to store money that isn’t being used for bills or anything else at the moment. Checking accounts are also useful because you can transfer your money back and forth between different banks, which allows it to be kept in more than one location if wanted. Individuals who want access to a large number of funds all over town often choose this type of bank account, so they do not need to visit multiple physical locations each time they make a transaction.

Savings Accounts 

A savings account is a bank account that allows you to deposit money and earn interest on the amount deposited. The bank usually pays a higher rate of interest for this than it does with its checking accounts, but your savings will be capped at certain levels, after which no more interest is paid out.

A savings account can also allow people to invest in other types of financial products like bonds or mutual funds. These are known as “brokered” bank accounts because they’re brokered through another company that works in conjunction with the bank. Banks pay these companies fees for their services, but customers benefit from being able to access investments otherwise unavailable due to the lack of minimum balances required by conventional investment products (like stocks). Some banks offer special incentives when opening savings accounts if you also agree to invest in other bank products like mortgages or loans.

Savings accounts can be used for more than just saving money, and interest rates vary from bank to bank. You’ll also find that savings account fees will increase when you’re below a certain balance threshold as well. However, if you regularly deposit enough funds into your savings account, then the benefits of having an FDIC-insured bank make it worth opening one even with high fees involved, so long as there are no minimum balances required on your personal end.

Money Market Accounts 

You should know that money market accounts are bank accounts that are invested by large corporations. The bank lends out money to other bank customers at a higher rate of interest than it pays on the money market account dividends, so these accounts generate income for the bank and their customers.

A money market account is an investment vehicle marketed as being equivalent to cash but offering better returns. It allows investors who want immediate access to part or all of their investments without selling them off (i.e., liquidity), as well as more favorable rates, compared with traditional savings vehicles such as certificates of deposit and Treasuries, while still providing protection from losses due to stock volatility within a specified range above $250,000 per depositor. Money Market Accounts differ from Traditional Savings Accounts because Savings Accounts have a lower interest rate and do not allow investors to make withdrawals except at specific times of the year.

Certificates Of Deposit (CDs)

Certificates of deposit are bank accounts that can be opened for a specific period of time. Many people refer to them simply as CDs, and they work in the same way as savings accounts: money is deposited into an account by another person or bank (referred to as depositing) that earns interest over a set amount of time before allowing access.

The main difference between certificates of deposit and other bank accounts is that you are required to leave your money untouched with CDs until the end date when it matures, at which point all accrued interests will become available again along with any initial deposits made. This means there is no option for withdrawal during this term, making CDs more ideal than regular savings accounts if you wish to avoid withdrawing funds prematurely, though due care should be taken when choosing one and the bank it is with.

Interest Rates On Bank Account Types And How They Work

The interest rates on bank account types can vary greatly. Here is a list of the different bank accounts, their interest rates, and how they work:

  • Basic bank savings account – usually 0% interest rate but has no limits on transaction amounts or frequency; rewards may be given to customers that meet specific requirements such as having direct deposits. 
  • Money market bank accounts – bank options with higher rates than savings accounts, usually greater than 0.50% interest rate 
  • Online bank savings account – bank options that offer higher rates but do not have a physical location, the bank may offer lower fees. 
  • Certificate of deposit bank accounts – bank options with an interest rate greater than a bank savings account usually require customers to deposit a minimum amount determined by the bank. 
The different types of bank accounts: explained

As you can see, there are different bank accounts, and you should choose the best one for your needs. Make sure to read more into it so that you would not make a mistake. Always consult professionals for this. Good luck!

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