Debugging Checking Account and Savings Account
When a person goes to a bank to open a new account, they are offered a variety of account types and features to choose from. These account types come with a number of features that can leave a person confused and gasping for breath. So which one should you choose?
If you are student and looking for a loan, then check out Understanding Subsidized and Unsubsidized Federal Student Loans! Wells Fargo offers five different types of accounts with a range of functions, which are:
Checking account: This account is helpful for your daily transactions. It gives you an easy access to your money and also keeps them safe. A checking account holder can use a debit card or checks to make transactions and for bill payments.
Savings account: A person can open a savings account in order to earn interest on funds saved for future use. The interest rates can be compounded after discussing it with the bank representative.
Certificate of Deposit (CD): CD allows a person to invest their money at a fixed interest for a pre-decided period of time. It offers higher interest rates than normal saving accounts because the fund you invest is kept for the life of the certificate. You must keep in mind before drawing any money from your CD matures that any early withdrawal attracts a financial penalty.
Money market account: Money Market Accounts are somewhat similar to a savings account, but you need to keep a higher balance to evade a monthly fee. The interest rates of MMA changes according to the money market unlike that of savings account which is fixed.
Individual Retirement Accounts (IRAs): IRAs allow a person to save freely for their retirement. An IRA can come in handy if you do not get any retirement benefits for your company or if you wish to save more than your employer-sponsored plan allows. Consult the bank representatives to get more details on IRAs.
Of all these account types, savings account and checking account are widely used. Still, many people struggle to differentiate between the two.
Why don’t we discuss both of these account types to clear the air?
Going into deeper details than the definitions given above: A checking account is specifically designed to meet all your daily needs while the funds kept in a savings account is meant to be kept for future use. As the funds are kept in the account, they generate interest over time. Savings account give a higher rate of interest than a checking account, meaning if you want to get good interest keep a large sum of money in a savings account and leave it there.
As checking account is meant for daily use, there are no withdrawal limits on how many times you draw money. In case of savings account, a person is typically restricted to three to six withdrawals per month and that too only a small portion of the account balance. There is generally no minimum balance limit for both these accounts, but some banks might have set a limit for both.
The interest rates on checking accounts are none to nominal but for saving accounts, interest rates are high but varies from bank to bank. A person can easily access the checking account any time they want, but when it comes to a savings account, usually you need to transfer the amount to the checking account first.
Other available features with checking account are an overdraft and external online transactions. Savings account, on the other hand, lacks these features and only gets internal online transaction with some banks.
