Different Types of Bank Accounts

Listed here are types of bank accounts with definitions and explanations, to help give you a better understanding of each type of bank account and what sort of bank account will suit your purposes. The only information to be excluded from this article will be specific interest rates, as each bank has its own set of rates, and account enrollment procedures, as each bank also has their own set of enrollment procedures.

The Basic Checking Account

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The first on our list among types of bank accounts, the Basic Checking Account or Personal Checking Account allows you access to personal checks which you can use to pay for your purchases and bills. This type of account does not earn any interest and, in most banks, requires you to maintain a minimum balance. Penalties for failure to maintain the monthly minimum balance differ from bank to bank. The Basic Checking Account will most likely give you access to an ATM card and online banking.

The Savings Account

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Second on our list among types of bank accounts, the Savings Account, or Personal Savings Account will mostly likely offer you ATM services and online banking. This is the most basic among all types of bank accounts and earns you minimal interest rates. Again, banks have their own set of interest rates. You will have to surf their websites to gather information. If the websites do not carry this information, you may call them through their customer service hotline, or visit the bank itself.

The Certificate of Deposit

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The Certificate of Deposit (CoD) is another term for Time Deposit. Time deposit allows you options for fixed, and bigger interest rates in exchange for not withdrawing your money until the specified time has elapsed. Typically, CoD have time periods of one month to five years. There are also two types of CoD; these are the small CoD and big CoD. This is determined by the amount of money you place into a time deposit. For big CoD, the interest rate should be negotiable. The fixed interest rates for CoD vary from bank to bank, as well as the thresholds between small CoD and big CoD. CoD accounts do not have online banking, nor ATM cards.

The Money Market Account

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The Money Market Account has the potential to earn higher interest rates based on the prevailing conditions of the Money Market. The interest rates for this type of bank account is fluid. These accounts require a higher than average minimum monthly deposit. Failure to maintain the minimum balance will accrue penalties from the bank. The Money Market Account is totally different from Money Market Funds.

Individual Retirement Account

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In the United States, the Individual Retirement Account (IRA) takes a set amount from your annual income. Said amount is tax deductible as retirement savings. Those who wish to open an IRA must buy an endowment or annuity contract from insurance firms. This really is a very complicated form of bank account because banks may be regulated by varying laws from state to state. To learn more about an IRA account, it would be better to personally visit your preferred bank.

Interest Bearing Checking Accounts

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The difference between Interest Bearing and Basic Checking, types of bank accounts, is that the latter type does not have interest. For interest bearing accounts, the requirements vary from bank to bank. Usually, banks will require higher initial deposits and a higher monthly minimum maintaining balance. Interests rates vary as well, from bank to bank. Truthfully speaking, the interest rates aren’t really that good.

Brokerage Accounts

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Investors must open a Brokerage Account by depositing cash or linking a bank account with an investment brokerage firm. With finances in position, you may begin trading for stocks, bonds, currency and other available investments. The brokerage will perform the trade for you, and will be paid via commissions.

Recurring Deposit Account

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This is India’s initiative to give low income workers the possibility of participating in fixed term accounts with higher interest rates, such as time deposits. With the recurring deposit type of account, the idea of installments is mixed into the picture. Depositors make regular monthly deposits with a regular amount of money as an installment towards the whole amount of the fixed deposit amount.

Fixed Deposit

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Is a term mostly used in India and South East Asia, except for the Philippines, which uses the term Time Deposit similar to the United States. In the UK, this is known as a bond. Australia and Canada refer to it as a Term Deposit. This is where a fixed amount of money is deposited for a specified length of time for a fixed amount of interest. Please refer to Certificate of Deposit above.

Basic or No Frills Bank Account

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Banks all over the world have started to offer basic accounts that have no minimum monthly maintaining balance penalties. In the UK, the depositor has access to ATM cards, internet banking and a set number of bank account statements every year. In India, most basic account holders are allowed to withdraw only up to four times a month. Guidelines and rules vary from bank to bank, country to country.

Credit Union Accounts

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Accounts made in Credit Unions are mostly similar to Commercial Banks. The main difference lies in the corporate structure of a Credit Union; where Credit Unions try to give its members better service and rates of interests and loans. Furthermore, Credit Unions are owned by the depositor. Each depositor, no matter the amount of money in his/her account, is entitled to vote for the Credit Union’s directors. While it cannot be a non-profit organization to survive, Credit Unions call themselves not for profit organizations, emphasizing their efforts to give better services to its members.

Joint Account

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Joint accounts are opened by two or more individuals. In the US, the type of joint account must be specified. A joint account survivorship means that if one account holder dies, the whole account is left to the remaining account holder(s). In convenience joint accounts, the primary holder of the account retains ownership of the account. Joint accounts let people and business partners to deposit and withdraw from a single account.

Student Account

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A student account normally has overdraft. Overdraft means withdrawing more money than what your student account contains. Banks have different overdraft amounts and different interest rates for the overdraft. Going over those allowed overdrafts means penalties are incurred. Student accounts are also more accessible to modern communication technology such as mobile phone apps, e-wallets, and internet banking.

Business Account

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Banks offer credit, loans, savings, and checking accounts for the business entity, instead of the individual. Some banks exclusively service the business community. In the US, banking was divided into retail and investment banking by law. Retail being banking services for the individual, and investment banking for the business entity. This law has since been modified and allowed for banks to service both customer types at once.

Shariah Account

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The Shariah Bank Account is a type of service where Islamic Laws are respected. For example, investments cannot be made in business entities that manufacture alcoholic drinks or those industries that produce pork. For more information, see Shariah Banking Laws.

U.S. Dollar Savings Account

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The last in our list of types of bank accounts, this is, in countries outside the United States, a foreign currency account. Interest rates vary from bank to bank. However, if you do earn interest, you earn it in US dollars. In third world countries where the currency exchange rates to the dollar are pretty high, a US dollar savings account is a definite advantage.

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