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What Bank Accounts Do You Need?

Understand the Basic Bank Accounts


You may be wondering what types of accounts that you need. There are many options available to you, but you may be struggling with what type of account you should open. Everyone should have at least two accounts, a checking and a savings account. There are other options that you can consider adding as well. Once you begin investing money, some of the money in your savings accounts at the bank should be transferred into your investing accounts. As you consider the types of accounts you need, you may also want to consider switching to an online only bank for some accounts like your savings account. You may be able to earn a higher interest rate this way. You may also consider using a credit union, which offers the same protection as a bank but with lower fees. 

1. A Checking Account

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A checking account is essential to managing your money effectively. You can get by on a cash only basis, but it makes it much more difficult to pay your bills. A checking account will allow you to pay your bills and easily access your money. When you open your checking account, you should also get a debit card. This can be used at the ATM, and at stores. It can also be used to make online purchases. If you are trying to get your business finances separate from your personal expenses, you may want to open multiple accounts.

2. A Savings Account

A basic savings account is another option that you may consider. You should have at least one account that you can save money in separately from your checking account. One of the advantages of a savings account is that it has a lower minimum balance requirement. It is the best choice for someone just starting to save money. One of the disadvantages is that the interest rate is a little lower than other account options. Another option is to consider opening an online savings account since the interest rates are often higher than traditional bank accounts.

3. A Money Market Account

A money market account is another savings account option. A money market account offers a higher interest rate. If you have one through the bank, it is guaranteed by the FDIC. You can right checks off this account. It has a higher account minimum balance, and if you cannot maintain this balance you will be charged fees. The higher interest rate is likely not worth the fees, if you cannot steadily maintain the minimum balance requirement. A money market account is a great option for emergency funds.

4. Certificate of Deposit

Certificates of Deposit or CDs are another option available at banks. This account offers a higher interest rate, but you lock the money in for the length of the CD. The interest rate may stay low when interest rates actually rise. Additionally ,you cannot withdraw your without taking a penalty until the period of the CD is complete. This is a good option when saving for something specific or for a small portion of your emergency fund.

5. Overdraft Protection

You may also open an overdraft protection or a cash reserve account. This account will protect you from overdrawing your checking account. One form of overdraft protection is attaching a line of credit to your account. Another option is to have your savings account connected as your overdraft account, and money will automatically be transferred over. It is important to realize that you should not utilize these services unless it is an emergency.

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