There are tons of bank accounts, but which one is right for you? It can be stressful for people who are new to banks, so here is a quick look at what bank accounts are good for what.
Why Do I Need a Bank Account?
Most payment methods now are digital, and lots of bank accounts offer online banking payment options for you to use. Plus, some online payment services like NationalPayCorp will likely need you to have a bank account. A bank account, credit card, or debit card will allow you to fund these digital wallets to send and withdraw funds, so having a bank account will be very convenient.
A savings account is pretty straightforward; ideally, you want to use this account to save money. You do not usually use this account to buy things or pay bills, but some people can use their savings account to do so.
Basic Checking Account
A checking account is a kind of deposit account where you can make withdrawals and deposits. Most people use checking accounts for daily transactions, such as depositing and withdrawing checks, paying bills, withdrawing cash using a debit card, etc. There are many kinds of checking accounts, and they are often targeted at certain demographics like students, seniors, etc.
Money Market Accounts
Money market accounts are non-financial accounts where you pay interest based on the money market’s current interest rates. While it is similar to a savings account, it is only an ideal option if you have a fairly high-interest rate in your country’s market.
IRAs (individual retirement accounts)
IRA is an account that lets you save money for retirement. The idea is simple: you will only get taxed for your bank balance when you withdraw, so you will only have to pay taxes when you retire. Therefore, you can grow your money for your retirement with interest without having to worry about taxes, so you will earn more money in the end.
There are two kinds of IRAs: Roth and Traditional. You pay taxes immediately if you have a Roth account, and you pay taxes later if you have an IRA. Most people choose IRAs because they only have to pay for their taxes when they do not have a high income anymore since they are retired.
While it is not as common, a Certificate of Deposit is a special type of savings account that certain financial institutions offer. It is extremely specific; it is connected to the performances of single or multiple market securities or indexes. So, it is good for people who know the market and want a long-term savings plan.
Brokerage accounts are specialized accounts that are meant to invest in the stock market, but you do not need to use a 401k account or IRA account. It is good if you capped your retirement accounts or want to find other ways to invest your money other than retirement.
Now that you know what bank account is best for what, you can choose which bank accounts will suit your needs and you will know which ones you should set up.