6 Different Types of Bank Accounts and Their Features
- What kind of bank accounts should I have?
- And Finally, What is a Giving Account?
- How can Spiral help with your financial goals?
You are an individual with your own circumstances, goals and aspirations. It makes sense that your bank account should also custom fit your life. We will be covering the various types of bank accounts available and the features they offer.
What kind of bank accounts should I have?
The type of bank account you choose to open will depend upon your own personal situation and financial goals. It is a good idea to know which type of bank account is best for everyday transactions and which ones may be more suited for other purposes such as retirement or charitable giving.
The following is a list of 6 different types of bank accounts and what purposes they are meant to accomplish. Each type of account and each bank may charge varying fees that you should keep in mind We will be covering the range of fees for the various types of accounts.
At the end of the article we’ll also share insights about a new kind of Giving Account from Spiral banking services¹, which is designed to make it easy for Spiral customers to make charitable donations to causes.
1. Checking accounts
If you need to have continuous access to your money and earning interest is not a big deal to you, then you may want to consider opening a checking account. This type of bank account is ideal if you want to deposit funds you will be using on a daily basis.
With a checking account, you will have to make sure to keep enough funds in the account to avoid overdrawing it or having debit card purchases declined. Many banks assess a charge for declining the transaction or returning the check. Some checking accounts, like the checking accounts that Spiral, a new ethical banking service,¹ do not require a minimum balance.
2. Savings accounts
If your goal is to accumulate money you plan to use much later and do not need to access on a regular basis, then you may want to consider opening a savings account. This type of bank account allows you to earn interest on the funds you deposit. Remember that the interest earned from savings accounts is income for tax purposes.
Savings accounts usually restrict to six (6) the number of times per month you can make withdrawals. Also, there is usually a daily required minimum balance you must maintain.
With a savings account at Spiral, you can earn up to 15x more⁴ on savings than the average interest rates paid by banks on savings accounts.
3. Money market accounts
If you regularly maintain a high account balance in your savings and checking account you may want to consider opening a money market account which can enable you to earn higher interest rates than with most savings accounts. You will also still be able to write checks with this type of account.
On the other hand, money market accounts will usually have higher minimum required balances which can typically be as much as $1,000. Although the range can start as low as no minimum required, from $500 to $1,000 is most common. Also, your number of monthly withdrawals is generally limited to six with money market accounts.
The 4 types of bank accounts mentioned in this article so far are the most commonly used by everyday people. The following three may not be quite as common but they all have special features which you may want to consider for your own situation.
4. Certificates of deposit (CDs)
Another type of account you may want to consider if you are interested in earning higher interest rates are certificates of deposit (CDs). However, you should only open one of these types of accounts if you do not need to access the deposited funds on a regular basis. CDs are designed to hold your deposited capital for a fixed amount of time ranging from three months to five years.
CDs are considered low risk investments because you are guaranteed a specific rate of return as long as you do not withdraw your money early which will result in early withdrawal charges. It is common for early withdrawal fees to completely negate any interest you had earned with a CD.
5. Retirement accounts
If your goal is to put away money for when you retire you may want to think about opening one of the various types of retirement accounts available. The main advantage retirement accounts have over other types of accounts is the tax benefits. These individual retirement arrangements allow you to reduce your taxable income and grow your invested capital while avoiding taxation for which you would normally be liable.
How taxation works will depend upon the type of retirement account you decide to open. Traditional individual retirement accounts (IRAs) and 401(k) accounts allow you to reduce your taxable income. However, you will pay income tax on this money later when you withdraw the funds.
Another type of retirement account is a Roth IRA which allows you to avoid paying taxes on withdrawals. On the other hand, funds you contribute to a Roth IRA will not reduce your taxable income.
6. Brokerage accounts
By opening an account with a securities broker, you will be able to invest in various types of securities such as stocks and bonds. The money you invest can appreciate if the value of the securities you have invested in increases in market value. Also, you can earn cash or stock payments, also known as dividends, from companies you have invested in.
There is higher risk with brokerage accounts because the value of the securities in which you have invested may lose value. However, if you want to keep the money invested for several years or decades, can tolerate the risk and are looking tfor the chance of higher returns, then investing in stocks and bonds historically have out-performed the investment returns on savings accounts and CDs.
Also, you may want to go with a brokerage account instead of a retirement account if you want to invest your money but still wish to be able to withdraw your funds early without incurring a penalty for doing so. Most retirement accounts will charge you a penalty for withdrawing your funds prior to a specific age, currently 59 ½ years old.
And Finally, What is a Giving Account?
Spiral, a new ethical banking service¹ has created a special type of “Giving Account” that enables customers to use a simple mobile application to effortlessly support the causes they care about for actions that are good for humanity and the planet.
Spiral Financial customers can fund a Giving Account from deposits made to their Spiral bank account and use the Giving Account to make donations to their favorite charities. Spiral’s Giving Account benefits include the ability to:
- Give effortlessly to 1 million+ charities²: Build your giving portfolio and explore amazing new causes to donate to.
- Get your donations matched dollar-for-dollar, up to $150 per year³. Make your giving go further!
- Track donations for tax returns: The Spiral mobile app tracks all your donations so you can easily see who you’ve given to, and how much.
How can Spiral help with your financial goals?
Spiral is a new ethical banking service¹ that enables customers to use a simple mobile application to effortlessly support the causes they care about while earning bonuses⁵ for actions that are good for humanity and the planet. Using Spiral’s unique mobile application, Spiral customers can fund a Giving Account from deposits made to their regular Spiral account and use the Giving Account to make donations to their favorite charities.
- Earn up to 15x more⁴ on savings than the average interest rates. By earning more on your money, you’ll have the ability to increase support for your favorite charities.
- No minimum balance required.
- No monthly fees⁶ and no fees for transferring money.
- Peace of mind—All Spiral bank accounts are issued by nbkc bank, Member FDIC and insurance of accounts of up to $5,000,000 is available.⁷