It is often said that opening up a bank account is the first real step between adolescence and adulthood. Still, appreciating how these financial vehicles work is just as important for a middle-aged businessman as it is for a university student who is trying to save for a first car. Let's go over the basics of a bank account, the types offered, the advantages of each and what to take into account when choosing from a handful of institutions.
Bank Accounts 101: What is Their Intention?
From a very generic point of view, the purpose of any bank account is to provide a customer with access to his or her funds upon request. All accounts are now electronically integrated, so they can be accessed via a smartphone, a tablet or a personal computer (providing the client provides the correct credentials). Some accounts are associated with higher levels of interest and others are used to automatically pay bills without having the need to send a physical check into a company. Now that we have a basic understanding of how these accounts work, let's examine the types which are available.
The Main Types of Bank Accounts
The first (and most common) type is known as a debit account. This is normally the portal that will be accessed if the account holder wishes to withdraw funds from an ATM or to pay for a purchase using their bank card. While debit accounts are very useful, they are generally not employed to generate any appreciable amount of interest. This brings us to our next point.
Savings accounts are intended to provide the customer with a secure means to store their money as well as a way to generate additional profit by earning interest (expressed in a percentage of the total amount of funds). Savings accounts can be seen as a financial “fall-back” plan in the event that extra liquidity needs to be withdrawn. However, early withdrawals may be associated with considerable fees.
The final variant is known as a checking account. This is the account commonly used to pay online bills (sometimes known as direct debit). When one writes a physical cheque, the funds will be deducted from this account.
Things to Look Out for When Choosing a Bank Account
The first thing to examine is the minimum balance that is required in order to keep an account open as well as to avoid any penalties. Interest rates should also be addressed; particularly if you are interested in opening up a savings account. Other concerns include:
- What types of customer service are available?
- Can you access your account online?
- Are you provided with a dedicated mobile phone application?
- How many branches of the bank exist within your town or region?
Choosing the right banking account is an important decision. Please feel free to refer back to this article as a how-to guide in the future. The modern world of banking can be our best friend if we make the correct decisions now as opposed to later.
