Bank accounts provide convenience, security and safety for your money. Whether you prefer online banking, traditional banks or credit unions, there are many account options to choose from.
Different types of bank accounts can be used for different purposes as needed. Some can spend or pay bills, while others are for short-term or long-term savings. The most common types of bank accounts are:
A savings account.
A money market account (MMA).
A certificate of deposit account (CD).
The most basic type of bank account is a checking account. You can think of it as a home base. For most people, it’s where their paychecks are set aside, bills are paid, and where they keep the money they need to get by quickly.
Current deposits, which can be opened at traditional banks or online banks, are provided with a debit card. It works just like cash. But now you don’t have to carry a pocket full of money. Instead, you can enter your current account. Then, when you go to the grocery store or gas station, you can scratch off your debit card. This amount is usually deducted from your current account on the fly. Depending on the provider, some transactions may take several days to process. In this case, you should not spend twice as much money. Please explain in more detail in a little while!
Current invoices also make budgeting and paying bills easier. If you set up automatic bill payment, it will be deducted directly from your current account after the due date. No more scratching stamps and envelopes, mailing mortgages or forgetting to pay light bills. The budgeting app also allows you to connect your monthly budget to your current account to easily keep track of all your expenses and keep you on track with your money goals.
Savings accounts are where you put the money you want to save. Typically, savings accounts have several features that encourage you to keep money in your account as long as possible. Many people pay interest, which means that the value of the deposit will increase over time. The amount of interest that accrues on an account depends on market conditions and financial institutions. Some banks offer higher interest rates than others.
Money in a savings account is liquid and easy to withdraw, but money in a savings account is slightly less liquid than money in a checking account because a check is not provided. You can withdraw cash from your deposit account with an ATM card or transfer money electronically to that account. You can also set up direct withdrawals from a regularly funded savings account.
Many savings accounts are free, but your account may charge monthly maintenance and transfer fees. Also, some savings accounts have the lowest amount in the account and may charge a fee if your balance falls below a certain threshold. Your Mid-Penn Bank savings account has no minimum balance fees, monthly administrative fees or transfer fees to other Mid-Penn Bank accounts.
Savings accounts can be ideal for storing money you may need later, such as funds for emergencies or vacations. If you want to save for long-term goals, a better option may be to open an account that can generate higher returns.
Money Market Account.
A money market account is a type of savings account that provides current account flexibility. An MMA usually has a higher interest rate or is proportional to a savings account, but it also offers debit cards and check-writing privileges. Money market accounts are usually limited to “six convenient withdrawal rules” such as savings accounts, but these rules can vary from bank to bank. They often ask for a higher minimum amount ($2,500) to open.
Who it’s for. People who save a lot of money don’t want to be tied to the stock market or CDs.
- Emergency funds.
- College registration fee.
- Planned tax payment.
- Down payment on a home.
- Debit card purchase.
Basics of a savings account certificate.
A certificate of deposit (CD) is a term deposit account. If you open an existing CD account, you will leave the money you saved for a certain period of time. This is called the redemption period, during which you will receive interest on the balance.
When the CD matures, you can withdraw your original deposit along with the interest you earn or transfer the entire amount to a new CD. Banks can provide CDs for a short period of 28 days or for more than 10 years. Generally, a longer period means a higher APY. In terms of savings options, CDs may work for money you won’t need right away, but they may not work for emergency funds.
With most CDs, you can get the same interest rate for the life of the CD. However, if you roll over the CD and raise the CD fee, you may raise the fee and APY about once or twice over the life of the CD. Some CD owners use a strategy called the CD ladder to provide more flexibility by staggered expiration dates for multiple CDs.
One thing you need to know about CDS is that if you withdraw money early, you may be charged an early withdrawal fee. Depending on the terms of the CD and the bank’s policies, this fee could be a percentage of interest earned, all interest earned, or a flat fee. Therefore, it’s important to familiarize yourself with the details of your CD account before opening a CD account. You can also find no penalty CDs with no penalty withdrawals.
Individual Retirement Account (IRA): An Individual Retirement Account (IRA) or Individual Retirement Account allows you to save for retirement on your own. These plans are useful if your employer does not offer a 401(k) or other qualified employer-sponsored retirement plan (QRP), including 403(b) and government 457(b), or if you want to save more money than your employer-sponsored plan allows. These accounts are divided into two types: traditional IRAs and Roth IRAs. Roth IRAs offer tax-free growth potential. Investment income accumulates in the accounts for more than five years and is distributed tax-free at retirement if you are over age 59 or due to death, disability or first-time homebuyer exemptions. Traditional IRAs offer tax-deferred growth potential. You probably don’t pay taxes on investment gains until you withdraw or “distribute” money from your account in retirement. Both types of IRAs offer investment flexibility, tax benefits, and the same contribution limits. Before you choose an account, we recommend that you talk to your tax advisor about which type of account is best for you.