Types of Bank Accounts & Their Rate of Interest

The term “bank account” is often used to cover many kinds of financial services offered by a bank. To maximize the potential for the services a bank has to offer, it is helpful to understand the types of bank accounts and the rate of interest return that they typically offer.

Checking Account

A checking account is designed to be the account where most of your regular financial transactions take place, according to the article “Demystification of Bank Accounts” found on the Investopedia website. The federal government does not allow a bank to limit the number of transactions you can have in and out of your checking account each month, but you may get charged a service fee if you exceed the bank's maximum number of free transactions. A checking account traditionally does not offer any interest rate return.

Savings Account

A savings account is a type of investment account that the bank will normally require a minimum deposit to start, a minimum balance to be kept in at all times and a maximum number of allowable transactions. According to Investopedia, the interest rate offered on a savings account is loosely tied to the rate that the Federal Reserve Board sets. In general, when the federal interest rate goes up, your savings account interest rate goes up. There may not be a direct numerical relationship between the two, and the interest rate varies from bank to bank.

Money Market Account

Money market accounts require a minimum investment and the maintaining of a minimum balance like a savings account, and you are allowed to write a limited number of checks against the balance like a checking account. According to the article “Banking, Bank Accounts and Earning Interest Lessons” on the Money Instructor website, the major difference between a money market account and a savings or checking account is that it offers a higher interest rate than a savings account.

Certificate of Deposit

A certificate of deposit is an investment account designed to get you the maximum return on your investment in a short period of time. According to Money Instructor, the time period on a certificate of deposit can range from one month to five years. You can only access your money when the account has matured.

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