What Are The Different Types Of Bank Accounts? -Checking And Savings Accounts

what are the different types  of bank accounts? -checking and savings accounts

Nowadays, many types of financial institutions exist and these institutions offers different types of services. So before we proceed to understand the different types of bank accounts, it will be essential to know what a bank is;

A bank is a financial institution regulated at the federal level, state level or Both. The primary role of a bank is to take deposits and make loans. 

Banks and the financial services industries play an essential role in the economy because they enable consumers to borrow money, make investments, save for the future, and manage routine chores such as making deposits and paying bills.

Some types of banks are: Central banks and commercial banks. Also we have credit unions, and insurance companies.

Most banks in the united states are insured by the Federal Deposit Insurance Corporation(FDIC). In the event that a bank fails, the FDIC will insure deposit accounts up to certain restrictions. The current FDIC coverage limit per depositor, per account ownership type, and per financial institution is $250,000.

In this article, we provides you with information on: the different types  of bank accounts, the differences between a checking account and a saving account and types of bank accounts base on accessibility.

A bank account is a record maintained by a bank, in which it records an ongoing series of cash inflows and outflows on behalf of a customer.

Before you open an account, it is essential for you to understand the kind and type account, the advantages and disadvantages involved in it. 

Types of Bank Accounts [Checking and Savings Accounts]

As seen earlier, a bank is a financial institution regulated at the federal level, state level or Both. Basically, there are two main types of bank  accounts:

  • Checking accounts
  • Savings accounts

What Are The Different Types Of Checking Accounts?

These are the most basic and useful types of  bank accounts. They are designed to have an unlimited number of deposits and withdrawals and each withdrawal may be subjected to fees payment.

Some checking accounts do not allow for interest interest to be paid on any residual balance in it. There is no restriction on the amount of cash held in a checking account or the length of time money is to be held.

The different kinds of checking accounts offered by banks and credit unions. some include:

  1. Traditional checking account: These types of bank account offer checks, debit or ATM card and online bill pay options. You can waive a monthly maintenance fees by maintaining a minimum balance, some traditional checking accounts don't charge fees. These accounts may also offer overdraft protection.
  2. Premium checking account: This bank account typically offers perks that you had otherwise have to pay for. These may include a free safe deposit box, free personal checks, free official checks, free money orders and fees waived on some or all out-of-network ATMs. You are required to maintain a higher minimum balance on a premium account.
  3. Student checking account: Owned by students of age 18-23 ages. Might not require a maintenance fees for those who qualify. They may also offer overdraft forgiveness, ATM free reimbursement, free checks or other perks.
  4. Senior checking account: This type of bank account is own by people of  55 years and above. They may offer free checks, waived monthly maintenance fees and other perks beneficial to those who are retired or living on a fixed income.
  5. Interest-bearing account/Call deposit account: There are are variations on the checking account concept that are interest bearing. However, they have more restrictions that a standard checking account (such as a maximum number of check payments to be issued each month) and may require a minimum balance
  6. Zero-balance account: This account is funded only enough to meet the requirements of checks being presented for payment. By keeping the funded balance low, a company can keep most of its cash in an interest-bearing investment.
Other types of checking accounts include: Checkless checking account, Business checking account, Rewards checking account, second-chance checking account, and Private bank checking account.

What Are The Different Types of Savings Accounts/Deposit accounts?

These kinds of bank accounts are storage accounts and thus no or few checks are written against these accounts. Depending on the type of savings account, there may be restrictions on the minimum quantity of cash that must be retained in the account, as well as the minimum time period for which the cash must be held. 

With savings accounts, you most notify your bank before going to do a withdrawal and the bank pays you interest base on the amount of money you have saved and the time frame.

Various types of savings accounts exist some of with include:

  1. Traditional or Regular savings account: This type of bank account is good for people who need to save money  for a short or long term and are not as concerned about getting the best interest rate, expressed as the annual percentage yield(APY). This type of account allow you to make up to six months withdrawal(not  including withdrawals with ATM, in-person or at a branch) before incurring a penalty.
  2. High-Yield savings account: it is good for people to earn a more competitive rate on savings while minimizing fees. typically found at online banks, neobanks and online credit unions, offer a higher APY compared to regular savings accounts.
  3. Money market accounts: It is good people who want to earn interest on savings while having more options for accessing their money. It combine features of a regular savings account with that of a checking account.
  4. CD(certificate of deposit) account: it is good for people who want to earn comparative rates and will not need to access their savings right away. these are time deposit, meaning you agree to leave your money in the account for a set period  to earn interest without withdrawal.
  5. Cash management account: it is good for people who want to keep cash available to invest in their brokerage or retirement account. this account does not specific designed for saving.
  6. Specialty Savings account: Good for people who want accounts tailored to specific savings goals.
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What are the Difference Between A Checking and A Savings Accounts? 

After seeing the different types of bank accounts, it will be a wise think to discover the differences between them.

If you are new in banking, you might curious on which type of account choose, either a checking account to get access to a debit card or a savings account to take advantage of  interest. Here are some differences:

The ability to access money at any time

The ability to access money at any time is a big difference between a checking account and a saving account.

The primary distinction between checking and savings accounts is that checking accounts are used to access money for everyday consumption, whilst savings accounts are used to save money.

Checking accounts are considered "transactional" meaning that they allow you to access you money any where and at anytime. This is possible due to their ability to offer debit cards, checks and even digital payment like Apple pay. In contrast, the number of withdrawals you can make from a savings account each month is limited.

Age Restriction

Checking accounts, although convenient for daily cash needs, may be restricted to people under the age 18 year unless a parent or spouse act as a co-owner of the account, making sure  that its terms fit your financial needs. In the other hand, Savings accounts dedicated to kids through a parent or guardian is usually required as a joint owner.  

Saving Money for Long-Term Goals

Consider creating a savings account if you planned to set aside money for a long-term need or goal. Savings accounts are intended to keep money for a lengthy period of time in order to help you save for larger ambitions. Unlike checking accounts which enable you to make deposits for everyday purchases.

As money stays in your savings account, it will accrue interest and grow over time. But with checking accounts you are charge a fees for every withdrawal made. To access your money in a savings account, you have to go to your bank, set up a transfer online, or make an ATM withdrawal.

Different Account Types Base on Accessibility

We could also have different types of bank accounts base on the ability to gain access into the account.

When to are open an account whether a checking or a savings account, you are requested to say who can have access to your account. You may consider the following  types of account: Single, Joint, and Currency accounts.

Single Account types

These are either a savings or checking account that can be access by the owner and any financial transactions on the account most be approved by the owners signature or password.

Joint Account types

These are accounts in which more than one individual has legal rights to the account. The could a family account, a business account or a meeting account. It could be a checking or a saving account but the limitation to this types is that all the parties involved most give in their concern before any financial transaction is made.

Currency account types

Currency accounts are a way to keep, send and receive multiple currencies. They can be useful if you are regularly making payments, or receiving money, in other currencies. It is important for people who travel a lot. some of the types are:

  • US Dollar account: This types of accounts allows you to save, deposit, receive and make payments in foreign currencies, including US dollars. it is also call a domiciliary account.
  • XAF accounts allows financial transactions within the Central African States.
  • EUR account allow you to make financial transactions in euro. This help cut the cost of switching between currencies.  

Final Thought About The Difference Types of Bank Accounts

Both savings and checking accounts are good base on the condition requiring their creation. if you are in to a business that requires you to make frequent deposits and withdrawals then, checking account will be the best but if you want to save money for a future project, then consider a savings account.

Ideally, you should consider opening both accounts to enjoy the benefits of each, Banks like NFC, ECOBank, Santander bank offer both types