Basic Bank Accounts

Published on 13 July 2012 by Raffick Marday

Basic bank account feature

Different types of bank accounts are defined by their function. Broadly speaking, there are 2 types of accounts:

  • Deposit accounts
  • Loan accounts

Deposit accounts – these are current accounts, savings accounts, or any type of account which allows you to deposit your money as well as withdraw from it. All these transactions are recorded. Some banks may charge a fee for this service. Some banks offer interest on the money deposited.

Some of the important deposit accounts are:

Checking accounts – are accounts where cheques are used as the main instrument for withdrawing money. You can make purchases, pay all bills, transfer money and give loans. You can make as many deposits or withdrawals as you wish. Some banks allow deposits and withdrawals to be made from ATMs.

Savings accounts – you can make deposits and withdrawals, but the number is restricted per month. Further, you cannot use cheques to access your money. Some banks may allow the use of ATMs to deposit/withdraw money from the savings account.

Money Market Accounts – offer a higher rate of interest. You need to maintain a minimum balance to start earning interest. Further, the number of withdrawals permitted is 6 per month, 3 of which could be by cheque.

Time deposit accounts – are also called Certificates of Deposit (CDs). You make a deposit for a certain fixed time period. In return, the bank pays you interest. The interest paid on a CD is higher than what is paid in other types of accounts. Some banks allow customers to withdraw the interest without touching the principal. In case a customer withdraws his principal, he is charged a penalty.

Loan accounts – this is a debt instrument and there are clear contract rules for the use of this account. The customer borrows a principal amount, which he has to repay in regular installments with an interest that the bank charges.

There are different kinds of loans:

  • Secured
  • Unsecured
  • Demand

Different types of bank accounts include:

  • Cash credit accounts
  • Fixed accounts
  • Recurring Deposit accounts
  • Office accounts (for internal use in banks)

Best Bank Accounts

While scouting around for banks, you need to be sure about two main factors:

  • Your purpose; why you need this account
  • How many transaction you are likely to make in a year

Once you are clear about what you are looking for, you can search for the bank that suits your needs.

If you are looking at checking accounts, best bank accounts offer –

  • Free cheques
  • No minimum deposit
  • No ATM charges
  • Linking to savings account so that extra money can be deposited in it, thus earning you interest (check with credit union to find out which banks offer the best rates of interest).

For savings accounts, best bank accounts offer –

  • High interest payout
  • No minimum balance account
  • Linking to checking accounts so that you can pay all your bills through that account

If you are fiscally responsible i.e., you buy only those things that you can pay for, then you can avail of the credit cards that best bank accounts offer. Points to remember:

  • Maintain a balance sheet where you enter details every time you use your card
  • Never lend your card to anyone
  • When payment is due, it is better to make the full payment

Some of the best bank accounts are:

  • Royal Bank of Scotland
  • Barclays
  • Secure Trust Bank
  • Halifax
  • Natwest

Watchfire GómezPro, an Internet research firm, gave a list of the best bank accounts that are online, based on the services and features that customers want. These banks offered a guarantee against fraud and late bill payments.

Some of these are:

  1. Wells Fargo
  2. Citibank
  3. Bank of America
  4. E Trade Bank
  5. Huntington

Internet-only banks pay better rates on savings accounts since their overheads are low. Some banks offer a dedicated finance manager, so if there is a problem, you can call the bank and talk to them.

The only drawback to internet banking is depositing money. In case direct deposit is not possible, then you will have to mail the deposit to the bank, or deposit it in the Bank’s ATM, or electronically transfer funds from another bank. One excellent feature about internet banking is that banking is simple and quick. Their sites are easy-to-understand, and easy-to-navigate. They provide transaction reports and warn you in case of security threats.

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