April is Financial Literacy Month, and to celebrate, each week Auburn Savings will be posting a new blog with tips to help you towards financial success. The first blog in the mini-series focuses on different types of bank accounts and tips on how to choose the best one for your needs!
Selecting the right bank account is a crucial step in managing your finances effectively. With so many different options available, it is important to understand the different features and benefits of each type of account to make your decision.
Understanding Different Types of Accounts
Choosing the right bank account can seem overwhelming with the number of options available. Each type of account serves a different purpose and offers its own unique set of features. Listed below are some of the major account types with their specific features explained.
Checking Accounts
Purpose: These accounts are ideal for everyday transactions such as paying bills, making purchases, and withdrawing cash.
Features: These accounts typically offer unlimited transactions, debit card access, online banking, and mobile banking.
Benefits: Easy access to funds and direct deposit options.
Considerations: Compare interest rates and maintenance fees, and check for any minimum balance requirements before opening a checking account.
Savings Accounts
Purpose: These accounts are designed for saving money and earning interest over time.
Features: These accounts typically will have a limited number of transactions you can perform online each month and higher interest rates.
Benefits: Encourages savings and provides a safe place for emergency funds while earning interest.
Considerations: Compare interest rates and maintenance fees, and check for any minimum balance requirements before opening a savings account.
Money Market Accounts
Purpose: These accounts combine features of a checking and savings account, offering higher interest rates and limited check writing capabilities.
Features: These accounts typically have higher interest rates, limited transactions per month, and check-writing privileges.
Benefits: Higher returns on savings with easy access to funds and FDIC insurance.
Considerations: Check for any minimum balance requirements or possible fees when deciding if you want to open a money market account.
Certificates of Deposit (CDs)
Purpose: These accounts are fixed-term savings accounts that offer higher interest rates in exchange for keeping your money deposited for a set period.
Features: These accounts will have fixed interest rates and specific term lengths such as 6 months, 1 year, etc.
Benefits: Higher interest rates with predictable returns and FDIC insurance.
Considerations: Before opening a CD, be sure you understand the possible early withdrawal penalties and the amount of time your funds will be secured in the CD.
Factors to Consider When Choosing a Bank Account
Your Financial Goals
- Determine your primary purpose for the account, such as if you will be using it for daily transactions or if you are saving for a long-term goal.
- Be sure to consider if you are choosing the correct account type for your financial goals.
Fees and Charges
- Compare possible monthly maintenance fees, ATM fees, overdraft fees, and other potential charges.
- Choose accounts that have low or now fees, or accounts that waive fees with certain conditions such as maintaining a minimum balance.
Interest Rates
- Compare interest rates offered by different accounts, especially paying close attention to savings accounts, money markets, and CDs.
Minimum Balance Requirements
- Check to see the minimum balance requirements for each type of account.
- Be sure that if there is a minimum balance requirement, it is an attainable amount for you to keep in the account to avoid fees and penalties.
Tips for Making the Right Choice
Evaluate Your Needs
- Assess your current financial situation to determine which account type best aligns with your future goals.
- Consider opening multiple accounts if you have diverse financial goals, such as a checking account for daily transactions and a savings account to save for a car.
Research and Compare
- Take the time to go over the different types of savings and checking accounts and what they offer.
Ask Questions
- Don’t hesitate to ask a Customer Service Representative for help comparing different account features, fees, and benefits.
- Seek clarifying information on any terms or conditions that are confusing to you.
While choosing the right bank account can feel overwhelming, it is important to remember that our Customer Service Representatives at Auburn Savings are here to help. By understanding the different types of accounts, we offer and asking questions, you will be set up in the right account in no time. Reach out to one of our Customer Service Representatives today to get started on your journey towards your financial goals.
This blog is for educational purposes only and should not be used as financial advice. Come inside and visit a branch, and one of our Loan Officers will be happy to assist you. At Auburn Savings, we nurture relationships, foster ambition, and are driven by purpose—You Come First. Bank On Us™.