Want to start managing your money at a local bank? Here are some of the most common types of accounts and how they work!
A checking account is used to deposit your money including paychecks, cash or refund checks and to pay for short-term expenses. You can withdraw money from your checking account by using a debit or check card, writing checks or withdrawing cash from an ATM. Many local banks offer additional services such as mobile deposit, where you can deposit checks from your phone.
The purpose of a savings account is to put money away for longer-term needs or emergencies. Money deposited in a savings account earns interest. Interest is the amount of money you earn calculated as a percentage of the money you have in your account. The bank or financial institution where you have your account pays interest for the privilege of using your money for other purposes such as providing loans to other customers. While interest varies by institution, many local banks offer better than market rates.
Interest-Bearing Checking Accounts:
Some banks offer interest-bearing accounts. The amount of interest paid is usually much lower than a traditional savings account and often you are required to keep a certain amount of money in the account.
Certificate of Deposit (CD) Accounts:
A CD is an investment account in which you agree to let the bank keep your money for a specific period of time. The bank, in turn, agrees to pay you a specific rate of interest on the money you keep in the account. The period of time often varies. The longer the timeframe and the greater the amount of money deposited, the higher the rate of interest paid. There is usually a penalty if you take your money out before the end of the agreed upon timeframe.