At first glance it might seem like banking is an easy thing to figure out. Open an account, throw some money in there, and don’t touch it! But there is actually quite a bit more to banking than that. If you don’t pick the right type of account, or accounts, you could either pay extraordinary fees or lose out on a ton of interest. Whether it’s a personal account or a business account, you need to do your homework and pick the right one for own unique situation.
A personal bank account actually have several more options than you would think. First, consider whether you want a savings or a checking account, or perhaps even both. I have a saving account that I keep a minimum balance to avoid any unnecessary fees, and then a checking account that I routinely draw on when I need to pay my bills. The benefit of having both is that my savings account earns a higher interest rate, but my checking account is needed source of liquidity each month. Everyone has bills to pay. I even have an account with online bill pay, which is great because I no longer have to purchase stamps or envelopes.
If we want to delve even deeper into savings accounts, there are quite a few different kinds. If you are using a savings accounts for an emergency fund, then you probably want easy access to it. However, if you have additional funds that you are saving up, say for retirement, then you can look at CD’s or Money Market accounts. Your funds are generally tied up for a specified period of time, and if you touch them during that time then you will probably be charged a penalty. However, if you can comfortably let your funds sit in those accounts for the entire term it can add to higher interest than you would have received in a typical savings account.
A business account is whole another scenario. These types of accounts generally have high volume transactions, both deposits coming in, and payments going out. You want to make sure that there aren’t any minimum balance fees, and that you aren’t restricted in how many checks or payments you draw on the account each month. This is especially important for any new business as they typically need some time to figure out their deposit and payment trends.