account

Banking Terms -> account

• Bank accounts represent financial accounts in banks in which financial institutions hold money for account holders, resulting in a debt balance or positive balance. Alternatively, banks loan money to customers, and this leads to a credit or negative balance. Bank accounts are used to deposit savings, unlike brokerage accounts which are used to sell and buy securities. Savings and checking accounts are two main types of bank accounts.
  
  Broadly speaking, a bank account refers to a monetary account, designed to process multiple transactions. Bank accounts make it possible to deposit money, thereby earning monetary returns. Some accounts come with debit and credit facilities and cannot fit neatly in a polarized definition. They have different names depending on the country where you open an account. For example, checking accounts in Canada and the United States correspond to current accounts in the United Kingdom.
  
  There are different types of bank accounts, and some may work better for you than others. If you choose a checking account, you can loan or give money, pay bills, and make purchases. Checks can be used for money transfers as well. You can transfer money from your account to a bank account held at a different bank. Typically, you will be allowed to make as many withdrawals and deposits as you need to. Many bank clients also choose to deposit and withdraw money through automatic teller machines.
  
  A savings account is another type of account that pays interest. Account holders cannot write checks or otherwise use the money directly. With this account, holders deposit some of their liquid assets and earn monetary returns in exchange for that. Money cannot be called in immediately, and you cannot free up cash without incurring a penalty fee. Banks typically limit the number of financial transactions (deposits and withdrawals) that can be made every month. At the same time, holders of savings accounts may be allowed to withdraw money and make deposits through ATMs. Passbooks are provided with savings accounts, helping account holders keep track of the transactions they make.
  
  Another type of bank account offered by some institutions is the no-frills bank account. It is a basic account that allows bank clients to cash checks and pay bills without having to pay high fees for these transactions. If you choose such an account, you may be allowed to make only a limited number of withdrawals and deposits. The number of checks to be processed will also be limited within a given month. No-frills bank accounts typically don’t go with interest.
  
  A money market account is still another deposit account offered by banking institutions. They invest in various corporate and government securities, thus paying interest to depositors. Interest paid is determined by the current interest rates set on the money markets. Money market accounts differ from other bank accounts in that they offer a higher interest rate and thus, a higher minimum balance is required. In this way, bank clients avoid paying monthly fees and earn interest.
  
  Finally, certificates of deposit are yet another type of bank account in which bank clients deposit certain amount of money for a specified period of time. You cannot withdraw the money from the account before the maturity date. Some banking institutions allow this, but you will be charged a penalty fee. The interest banks pay on certificates of deposit is normally higher, compared to other types of accounts. However, the interest is based on the period of maturity, meaning that the longer it is, the more the account will earn.

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