The 3 Types of Bank Accounts
People need money for different purposes, so financial institutions make it easy to separate money by offering different types of bank accounts. This also benefits people because different accounts can make it possible for them to avoid paying fees, maximize the return on each account, and easily manage their money. The types of accounts they have the option of opening include the following:
A Savings Account
A savings account is an account for money that people do not need to pay for immediate expenses. In most cases, savings accounts are interest-bearing accounts, so the amount deposited has the opportunity to grow.
The first bank account that most people open is a savings account. Parents open them with their children so that they can learn how to save money. Teenagers are also welcome to open savings accounts after they get their first jobs; they also use savings accounts as a place to save the money they earn from doing household chores. It is a significant financial vehicle for teens when they go to college.
A savings account is a crucial step to take to establish a relationship with a bank. If someone joins a credit union, they establish membership in the institution.
A Checking Account
A checking account is for people’s money used for paying their everyday expenses. It is highly convenient because people receive a debit card with a checking account that they can conveniently use to make purchases. The checking account also allows them to write checks to pay bills. Some checking accounts also earn interest.
A checking account gives people the opportunity to pay their bills quickly. For example, financial institutions allow patrons to set up automatic bill pay so that billed amounts will be automatically withdrawn on the dates that they are due. Writing a check and mailing a bill are entirely eliminated with this option. The checking account is so convenient that people can even have their paychecks deposited into their accounts through direct deposit.
According to the experts at SoFi, some checking accounts require that people pay fees. Before anyone opens a checking account, they must be sure that they are paying as little as possible in fees.
A Retirement Account
Retirement accounts allow you to save money to use during your retirement. The individual retirement account or IRA is one option, but banks also offer 401(k) accounts. In most instances, retirement accounts offer tax advantages. The money can grow in a 401(k) or an IRA each year, and the account owner does not have to pay taxes at that time. When they begin to withdraw the money later, they will be required to pay taxes. To get around this, people open Roth IRAs, and it eliminates the need to pay taxes on their withdrawals.
Now is the time to open a savings account online. At SoFi, they can get an account that gives them 1.25% APY when they set up a direct deposit. In addition to that, they will not be charged any fees. Contact SoFi today.