What Type of Bank Account is Right For You?

In today’s competitive banking environment, there are more options than ever for you to obtain the correct type of account for your banking needs. In this post, we’ll look through several of the available account types in an effort to help you figure out which is right for you.

Online Checking Account vs. Standard Checking Account

Let’s face it. If you’re going to get by in today’s society, you’ll likely need a checking account to serve as the center piece of your personal banking system.

And, one of the first choices to make when seeking out a checking account is deciding whether or not you want the checking account to be virtual (online-based) or housed at a standard brick and mortar bank.

While brick and mortar banks will often be more convenient and offer services such as certified checks, giving you quarters for laundry, etc, their fees and interest rates (if any) that they offer on their checking accounts will be less favorable than online banks. Therefore, it’s important to keep these differences in mind in determining which are the more important features for you to have.

Savings Accounts vs. a Checking Account

Having decided between an online or standard checking account at a brick and mortar bank, the next decision is whether you need to add a savings account to the mix.

While modern savings accounts and checking accounts have about the same amount of liquidity and security, there are still some differences. For example, checking accounts, as the name suggests, allow you to make more frequent withdrawals from them for purchases with checks or debit cards, while savings accounts will often have more limited withdrawal capability. In addition, the interest rate on savings accounts will almost always be higher than the rate on a checking account.

Certificate of Deposit

Similar to a savings account, a Certificate of Deposit (CD) is designed as a savings accumulation vehicle. However, there are important differences to understand regarding this type of account. The biggest difference is that with a CD, your money cannot be withdrawn for a set time period without incurring a 10% or more withdrawal fee.

It used to be the case that the yield curves made CD’s a pretty attractive options over savings accounts. However, my experience has been that the currently, the yield curve is such that the interest rate you’ll obtain on a CD where you money is locked up for a set time period isn’t that much higher than a liquid savings account. However, this may change in the future.

Business Account

Our last “stop” on our tour of the various types of bank accounts on the market today is the business account.

A business account is a great idea if your business is set up so that yourself and the business are separate legal entities or you are needing a multi currency account to conduct operations in a different country from where you live. However, a business account may not be required in all circumstances, such as if you conduct business as a Sole Proprietorship and have a lot of your business transactions going online through Paypal or a similar tool.

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