What are the different types of cash management accounts? what
and the pros and cons?
What are the different types of cash management accounts? what
and the pros and cons?
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Checking account. This is the most basic and useful type of
bank account. It is designed to have an unlimited number of
deposits and withdrawals (though each one may be subject to fees),
and does not allow for interest to be paid on any residual balance
in it. There is not usually a restriction on the amount of cash
held in a checking account, nor on how long it must be held.
Special types of checking accounts include:
Interest-bearing account. There are variations on the checking
account concept that are interest bearing. However, they have more
restrictions that a standard checking account (such as a maximum
number of check payments to be issued each month), and may require
a minimum balance.
Zero balance account. This account is funded only enough to
meet the requirements of checks being presented for payment. By
keeping the funded balance low, a company can keep most of its cash
in an interest-bearing investment.
Savings account. There are a number of variations on the
savings account concept, but the basic idea is that it is a store
of cash; thus, no or few checks are written against the account.
Depending on the type of savings account, there may be restrictions
on the minimum amount of cash held in the account, as well as on
the minimum time period over which the cash must be held in the
account. Several variations on the savings account concept are:
Certificate of deposit. This requires a fixed deposit amount
that the bank holds for a specific period of time, in exchange for
a somewhat higher interest rate.
Money market account. This account offers slightly higher
interest rates in exchange for more restrictions on withdrawing
funds from the account.
Individual retirement account (IRA). This account stores funds
that an individual is setting aside for his or her retirement.
Funds placed in these accounts are tax-advantaged in different
ways, depending on the type of IRA that has been set up.
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