Question

Discuss checking and savings accounts. How do they work? How are they similar? How do they differ? What are CDs? What are advantages of an ATM?

Answer 1

Discuss checking and savings accounts. How do they work? How are they similar?

Checking account

A checking account is an essential part of everyday banking. It is where you keep cash that you’re ready to spend or deposit money that you receive from an employer.

Banks and credit unions provide checking accounts, and there are several different kinds that consumers can choose from. There are also alternatives for those who do not qualify for traditional accounts.

A checking account is a transactional account, meaning money goes in and out regularly. These accounts are designed to make it easy to receive and spend your money.

Generally, you will deposit your pay in a checking account or have your employer do so via direct deposit. Institutions like the Internal Revenue Service (IRS) can also use direct deposit to issue a tax refund or stimulus payment directly to your bank account.

Checking accounts generally do not make money for you. Most offer either no or very low interest. You should only keep money in your checking account that you intend to use in the near future.

If you do not need the funds available in the near future, you should move them into an account designed for longer-term goals, such as a savings account, retirement account, or investment account.

A checking account is useful if you need to:

• Pay bills electronically or via check
• Make purchases or ATM withdrawals using a linked debit card
• Transfer money to an account at a different bank electronically

Savings account

A savings account is a basic type of bank account that allows you to deposit money, keep it safe, and withdraw funds, all while earning interest. Savings accounts offered by most banks, credit unions, and other financial institutions are FDIC insured and typically pay interest on your deposits.Some savings accounts offer higher interest rates than others.

NOTE : In addition to higher interest rates on savings, online banks may charge fewer fees. For example, a traditional bank may charge a monthly maintenance or minimum balance fee for a savings account, while an online bank may not charge either of these fees.

How do they differ?

	Checking Account	Savings Account
Withdrawal Restrictions	None	Typically 3-6 withdrawals a month. Allowed to withdraw only a portion of the account balance.
Minimum Balance	Sometimes, varies by bank	Sometimes; varies by bank
Designed For	Regular use	Saving money risk-free for short- or long-term
Fees	Sometimes, varies by bank	Sometimes, varies by bank
Overview	A type of bank account that is designed for everyday money transactions.	An account that accrues more interest than a checking account does; intended for saving money.
Access	Any time	To use money, account holder must first transfer it to checking account (usually)
Other Features	Overdraft, external online transactions (money transfer, manual/automatic bill pay)	No facilities other than internal online transactions with some banks (i.e., transfer from savings to checking)

What are CDs?

A certificate of deposit (CD) is a product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time. Almost all consumer financial institutions offer them, although it’s up to each bank which CD terms it wants to offer, how much higher the rate will be compared to the bank’s savings and money market products, and what penalties it applies for early withdrawal.

Shopping around is crucial to finding the best CD rates because different financial institutions offer a surprisingly wide range. Your brick-and-mortar bank might pay a pittance on even long-term CDs, for example, while an online bank or local credit union might pay three to five times the national average. Meanwhile, some of the best rates come from special promotions, occasionally with unusual durations such as 13 or 21 months, rather than the more common terms based on 3, 6, or 18 months or full-year increments.

Being open to different institutions and a variety of terms is key to scoring the highest returns. Often, silver stocks and other rare metal stocks are dependent on CD rates.

Opening a CD is very similar to opening any standard bank deposit account. The difference is what you’re agreeing to when you sign on the dotted line (even if that signature is now digital). After you’ve shopped around and identified which CD(s) you’ll open, completing the process will lock you into a four things.

1. The interest rate: Locked rates are a positive in that they provide a clear and predictable return on your deposit over a specific time period. The bank cannot later change the rate and therefore reduce your earnings. On the flip side, a fixed return may hurt you if rates later rise substantially and you’ve lost your opportunity to take advantage of higher-paying CDs.
2. The term: This is the length of time you agree to leave your funds deposited to avoid any penalty (e.g., 6-month CD, 1-year CD, 18-month CD, etc.) The term ends on the “maturity date,” when your CD has fully matured and you can withdraw your funds penalty-free.
3. The principal:With the exception of some specialty CDs, this is the amount you agree to deposit when you open the CD.
4. The institution:The bank or credit union where you open your CD will determine aspects of the agreement, such as early withdrawal penalties (EWPs) and whether your CD will be automatically reinvested if you don’t provide other instructions at the time of maturity.

Once your CD is established and funded, the bank or credit union will administer it like most other deposit accounts, with either monthly or quarterly statement periods, paper or electronic statements, and usually monthly or quarterly interest payments deposited to your CD balance, where the interest will compound.

What are advantages of an ATM?

An automated teller machine (ATM) is an electronic banking outlet that allows customers to complete basic transactions without the aid of a branch representative or teller. Anyone with a credit card or debit card can access cash at most ATMs.

ATMs are convenient, allowing consumers to perform quick self-service transactions such as deposits, cash withdrawals, bill payments, and transfers between accounts. Fees are commonly charged for cash withdrawals by the bank where the account is located, by the operator of the ATM, or by both. Some or all of these fees can be avoided by using an ATM operated directly by the bank that holds the account.

ATMs are known in different parts of the world as automated bank machines (ABM) or cash machines.

1 Quick Cash Withdrawal

2 Convenient 24×7 Banking

3 Withdraw Cash when overseas

4 Universally Accepted

5 Security features

6 Save your account from being dormant

7 Helpful Budgeting Tool

Other Advantages and Benefits of using Bank ATM Debit Cards

• ATM points are conveniently located at multiple locations. You can go the ATM of any bank to withdraw cash – provided your ATM card is linked with that bank.
• There is no need to fill out withdrawal and deposit slips – unlike the practice at the bank branch.
• Even when travelling overseas, you can withdraw cash at ATMs – provided your local laws permit it.