The United States of America and banking have grown up together. Often, the fate of US citizens has been linked to the kinds of banking available to them. Irresponsible banking played a part in the economic crashes of the 1920s and early 2010s. Knowing more about the kind of banking options available to you will help you avoid bad faith banking and make the most out of the savings that you have. The modern banking sector is full of innovative new account options aimed at private consumers and business owners. This guide has been put together in order to help you choose the right option (or options) when pursuing bank account offers.
The industry, which has until now been dominated by a few vast corporations, has been flooded with new and innovative challenger banks that largely operate online. These banks often offer accounting options that cannot be matched by traditional banks, but their services are not suited to every customer. The kind of bank account you choose to sign up for should reflect your financial and personal situation. Here are some of the most common kinds of bank account offered to customers in the United States.
Checking accounts are the most basic personal banking accounts available to people living in the USA. They are available at brick-and-mortar banks, challenger banks and credit unions all over the country. They are not intended to be savings accounts and do not accrue a great deal of interest. Instead, they are convenient ‘money containers’ used to easily store and access the money that you have. Most Americans prefer to use their checking account as opposed to their credit account when purchasing everyday items like groceries as they rarely involve the accruing of debt or future payments. Checking account customers can accrue some expensive debt if they go into their overdraft without consulting their bank beforehand, although low interest overdrafts can often be arranged in times of financial hardship.
For a more detailed guide to the ins and outs of checking accounts in the United States, check out this page set up by the Bank Of Labor: https://www.bankoflabor.com/community-personal-banking-checking-accounts/. All good modern checking accounts include the option to use mobile banking apps and contactless debit card payments. Mobile banking apps drastically reduce the need for customers to wait for appointments in their local bank and free people living in rural areas from the long trips into town that were made necessary by banking in the past.
Savings accounts are useful for people that want to make the most of the money that they own and that they do not intend to spend right away. The Unique Selling Point of most savings accounts is interest accumulation. The more money that is deposited into a savings account, the more money that will be accumulated in the form of interest. Savings accounts essentially reward customers that make large deposits and relatively few withdrawals. Banks offering good rates of interest as part of a savings account do so by essentially borrowing money from account holders in order to fund interest payments. This means that a mass withdrawal by thousands of customers can completely decimate a bank and leave it unable to honor the interest rates that it advertises. This happened on a huge scale during the 2008 financial crisis and is knows as a ‘bank run’. Do your research and find out just how stable your prospective bank is before being enticed by incredible rates of interest.
Money Market Accounts
Money Market Accounts are essentially a cross between checking and savings accounts. They are usually favored by consumers with high amounts of income that want to see the accumulation of interest while also being able to pay for bills. Money Market Accounts typically have high minimum deposit limits, which make them rather unsuitable for people without high levels of capital. Much like savings accounts, there is a maximum number of withdrawals that can be made from an MMA every year. This makes Money Market Accounts unsuitable for people that want to pay for everyday items using the pool of money they invest into them.
Certificate Of Deposits Accounts
Certificate of Deposit accounts work on the basis of a predetermined ‘maturity period’. This means that deposits must be left in the account for an amount of time before it can be withdrawn or accumulate interest. This kind of account is popular with people that want to set up trust funds for their children or save up for a new home.