Everyone has different financial goals to serve their future needs. And to support these goals, financial institutions like banks offer a variety of bank account types to aid their clients in achieving these goals.
For the most part, the primary utility of bank accounts is to store and safeguard an individual’s finances. That said, various account types exist with added features that help their users achieve much more.
For instance, some account types support long-term financial growth like holding money for property downpayment and large purchases. Others can be for more short-term purposes, like stashing cash to accumulate high-yield interest rates.
But these are just some of the bank account types you can access from your local banking provider. Here are some bank account types to help you find the right one for your specific needs.
1) Traditional Savings Accounts
The most popular bank account type is the traditional savings account. It’s typically the first bank account type a person will ever open.
A traditional savings bank account serves as both a short-term and long-term way to store money. This means users can put money in it for a few days or a few years, making it a fairly versatile storage solution.
Furthermore, the savings bank account is also renowned for its ease of availability, mainly due to the fact of its low minimum deposit limit of about $300 to $500, if not less. It’s also incredibly simple for users to deposit and withdraw money in this bank account compared to other types.
Like other bank account types, a traditional savings account is also a secure means of parking money, granting account owners peace of mind knowing their money is protected and guarded against theft. This is compounded by the fact that money deposited in this account is insured by the federal government.
Last, but not the least, users can accrue a modest amount of annual interest based on their deposit, which is typically paid out monthly.
Most people will use their traditional savings account as a temporary money-parking solution, given that there are more ways to earn from your capital. It’s also an easy way to save more from your income.
That said, its reliability, security, and accessibility make it a handy bank account type for anyone, making it a key component in supporting a person’s financial goals.
2) Checking Account
Another popular type of bank account is a checking account. Just like a savings account, a checking account is used for easy, everyday withdrawals and deposits.
However, unlike savings accounts, the primary distinction of a checking account is that it’s focused on facilitating daily transactions. This is unlike savings accounts, wherein the money stored is usually meant to be placed there for an extended period.
A checking account is often riddled with features that help it facilitate routine transactions. This includes making bill payments and everyday purchases. For business owners, this type of account helps employers give routine deposits directly to their employees.
Acquiring a checking account is a bit more difficult than getting a savings account, as it requires a minimum balance and a more rigorous screening method. It may require a minimum balance requirement too.
However, its accessibility overall is quite middle-of-the-pack when compared to other bank account types.
Considering the high volume of cash flow of a checking account, this bank account type offers a smaller interest than savings accounts.
That said, it’s still a great and secure bank account type for busy business owners and professionals who perform daily monetary transactions.
3) Cash Management Account
A cash management bank account, or a CMA, is a hybrid bank account type that has both a savings component and a checking component. It also comes with added investment opportunities.
This type of bank account is useful as an all-in-one, consolidated solution for various financial activities. This means that this bank account can be used simultaneously as a way to park your money and pay bills, without compromising on either activity.
Besides banks, this specific account type is also provided by brokerage firms, investment platforms, and other non-bank institutions.
This is because these latter institutions have dedicated investors who can help manage the investment portfolio of their clientele, enabling them to maximise profits for both their company and their clients.
Cash management accounts also often come with higher interest rates than traditional savings accounts, making you earn more money even if you don’t use the investment option. Despite not being managed by a bank, these accounts, especially from reputed providers, are also secure and can be accessed via applications on your phone.
The one downside of CMA is that it’s harder for the general populace to access it, due to its higher minimum balance requirements and fees. It’s also less common than savings and checking account types, making it harder for people in rural areas to open such an account.
The volatility of the stock market may also be a concern for investors. That said, if you’re willing to ride the tide of this higher-risk financial vehicle, then consider opening a CMA with Moomoo Australia or a local provider to get started.
4) Certificate of Deposits (CDs)
For people who want to invest with little risk, certificates of deposit, commonly known as CDs, may be worth considering.
This account type is characterized by its fixed interest rates and predetermined term lengths, typically spanning from months to years.
When compared to a traditional savings account, a CD has a higher return rate overall, making it excellent for parking money for the medium to long term.
Given the fact that CDs have a fixed interest rate, this provides investors and account users with a predictable but stable growth pathway for their investment.
Returns will definitely not be as high as stock market or crypto investments on a good day; however, it is a great option for conservative investors who want to park their money in something relatively low-risk.
That said, there’s a single disadvantage when opting for this bank account type.
Users will get penalised with a fee if they withdraw earlier than the maturity date. This means you have to be absolutely sure of your financial health before parking some cash into this account.
But if you have some money to spare and want to diversify your investments with a low-risk investment for future needs, opening a CD account is an excellent option.
5) Money Market Accounts
Money market accounts (MMAs) are similar to CMAs in the sense that they offer an investment component on top of savings and checking features. However, they differ in their utility, structure, and their main provider.
MMAs are offered by banks as a type of deposit account. They also are predominantly savings accounts that offer some degree of liquidity and higher returns via interest.
Unlike CDs, money market accounts grant users some degree of flexibility by allowing a few transactions each month. The interest rates, while higher than traditional savings accounts, are variable and depend on market conditions.
Just like CMAs, MMAs are also insured, granting users security for their fund deposits. Furthermore, the primary principal in the MMAs doesn’t risk losing value from a market downturn, making it an ideal low-risk investment.