Hola bellas! Did you know that there are different types of bank accounts? Some of the most popular types of bank accounts include:
- Checking account
- Savings account
- Money market account
- Certificate of deposit (CD)
A checking account is simply a bank account used to pay bills, make withdrawals, and deposit money. It is the most commonly used type of bank account for daily transactions. One of the benefits is that most checking accounts have online bill-paying services where bills can be automatically paid directly from the checking account.
Note: When applying for a checking account, make sure to look at the fees. A lot of bank accounts also waive the fees if you have a direct deposit set up or have a minimum balance.
A savings account is an account used to store savings or extra cash. Many times, it’s the first type of bank account people open because a lot of times, parents have opened it for them to start saving money. Maybe you were lucky enough and your papas (parents) or abuelitos (grandparents) opened one for you when you were young. A savings account is great, but one of the downsides of keeping your money in a savings account is that it offers a very low-interest rate (usually less than half of a percent).
Money Market Account
A money market account is a bank account that pays more interest than a checking or savings account. The interest rate you can earn with a regular bank account is less than half a percent, while there are money market accounts that pay close to 2%. If you open a money market account with $1,000 and leave it there for a year, if the money market account pays 1.75%, you will earn $189.44 in interest.
Bankrate.com is a great website to view the interest rates that different banks offer for money market accounts is Bankrate.com. Before, it was very common for accounts to ask for a minimum balance of $5,000 or more to open a money market account, but now you can open one with as little as $1 to get a decent interest rate through American Express National Bank.
Certificate of Deposit (CD)
A certificate of deposit is a bank account that gives you a higher interest rate than a regular bank account, but in order to get the interest rate they’re offering, you have to leave your money in the account for a certain number of months (it can be anywhere from 3 months to 5 years). Usually, the longer the term, the higher the interest rate. The downside is that if you take your money out before the time expires (before the CD matures), you will have to pay $ in penalties.
Lately, I’ve noticed that many money market accounts offer interest rates similar to CD rates, so you might want to consider opening a money market account instead (since it does not require you to leave your money in the bank account for a certain number of time). You can also use bankrate.com to compare interest rates for CDs. Don’t let too much time go by, get some extra $!