If you’re already convinced that you want to open a bank account, that’s great news! The next thing to consider is which type of account works best for you. There are number of account types, however the two most common are the following:
They are known as checking accounts because they typically come with a checkbook which you can use to make your payments. You’ll also receive a debit card that allows you to draw cash fee-free from any of their in-network ATMs.
- Your money is available to you 24/7.
- You can make cashless payments using your checkbook or debit card. You’ll also be able to make transfers directly to other bank accounts.
- The bank typically charges a fee for maintaining your account, however that’s not the case for all accounts! (check out the PODERcard)
- You can cancel this type of account at any time without any repercussions.
If you're interested in having a safe place to keep your money and watch it grow, then a savings account would suit you the best.
- It keeps your savings secure and adds a percentage to your total savings each year. For instance, if you have $5,000 in your savings account and your bank offers a 0.55% interest rate, you’ll have earned $27 at the end of the year. This percentage is dependent on the bank and specific savings account you select.
- You can deposit funds into the account through a variety of channels such as ATMs, online banking or in person at a branch office.
- Savings accounts typically require that you maintain a minimum average balance, failing which could subject you to a penalty. The minimum average balance differs across banks and so does the penalty, so it’s important you inform yourself on your particular circumstances and keep a healthy amount in your savings account.
Other types of bank accounts
Low-risk bank accounts
Many banks and credit unions offer low-risk accounts which allow their customers to keep their money in a safe place without having to worry about fees. The downside is that it generates almost no interest. If you're worried about paying high fees or you think that you might spend more than you've got in your account, this account might be right for you.
Second chance bank accounts
Second chance bank accounts are designed for people who have a negative banking history. Through these accounts, banks allow their clients to correct their past mistakes and show that they can make better use of their funds.
Payroll bank accounts
Payroll accounts are created with the specific purpose of receiving deposits for wages, pensions or government subsidies. Their main advantage is that they typically do not have any administrative or maintenance fees. The disadvantage is that you may not have access to all the banking features you expect from a regular checking account.
Money market bank accounts
These types of accounts are very similar to savings accounts, but they often require a higher balance to avoid being charged monthly service fees. They get their name from the fact that their interest rates vary according to the markets, as opposed to savings accounts that have a fixed interest rate. This can be advantageous when the market interest rate is on a prolonged high.