What Do I Need to Know About Making a Bank Deposit and Deposit Accounts?

What Do I Need to Know About Making a Bank Deposit?

Making a bank deposit involves putting money in the bank where it is held in safekeeping until you want to use it. As a consumer, you have many choices as to which kind of bank deposit you’d like to make and which one is going to result in the most benefits. Here, we look at the types of deposit accounts, the benefits and drawbacks, and which one is the best for your money.

The importance of deposit accounts

Anytime you make a bank deposit, you’re doing two things. One you’re securing your money and making sure nothing happens to it. M C Bank is insured by the Federal Deposit Insurance Corporation. This ensures that up to a certain amount, your money will stay safe. This makes your deposit at M C Bank much safer than keeping cash in your home or in a safe deposit box.

Another thing you’re doing with a bank deposit is making your money work for you. When you deposit money at M C Bank, we use your funds to earn profits and to make loans to other customers. In exchange, they give you interest on your money to reward you for letting them use it, and to incent you to keep more of your money with them for longer. The longer you keep money in an account, the more it earns compounded interest, which adds money to your balance over time. The interest rate determines how much interest accrues. Even with a low rate, bank accounts can be more beneficial than keeping funds elsewhere.

Types of deposits

There are two types of deposit accounts. The first is a demand deposit account, which allows you to deposit money and then withdraw it at any time. Demand deposit accounts include savings accounts and checking accounts. The second kind are time deposit accounts, which restrict access to funds for a certain period of time. These can include money market accounts, certificates of deposit (CDs), and Individual Retirement Account CDs.

Savings accounts and money market accounts. Savings accounts are designed to encourage saving, thus with many banks you may be charged if you make more than a certain number of withdrawals. Still, a savings account with a competitive high-yield interest rate can be a good option for saving if you need access to your money from time to time. Money market accounts work similarly to savings accounts in that funds can be accessed when you need them. Money market accounts, however, typically require a higher minimum deposit, which is rewarded by giving you a higher interest rate. If you have a large bank deposit that you do not need regular access to, a money market account can be a good savings mechanism.

Checking accounts. With checking accounts, you can deposit funds at any time, and then access them through your personal checks, balance transfer, debit card, or cash withdrawal at ATMs. Because they are not meant to be a savings vehicle, many checking accounts do not come with competitive interest rates. Some may also have monthly fees. Also, fees will occur for not having enough funds in the account to cover checks you have written.

Certificates of deposit. If you can make a bank deposit and keep it there, a CD is a great option. Certificates of deposit typically offer higher interest rates than savings accounts. However, you must keep the funds invested for a specific amount of time and accessing them sooner can result in penalties. The advantage of CDs though is that they offer a fixed interest rate. Whereas with savings accounts and money market accounts, rates can vary over time and may not always produce the same yield. With a CD you can shop around for the highest rate, and then “lock in” at the best one. The downside is that you also can’t move your money to another CD if you see a better deal down the road.

Individual Retirement CD Accounts. These accounts are designed specifically for when you achieve retirement. Both regular CDs and IRA CDs often renew automatically, so with both it’s important to know their maturity dates. If they renew, you will not be able to access your money for another term of time without incurring penalties. Still, IRAs are ideal if you want a good interest rate, and if you’re looking for a reliable retirement investment that is not subject to the variables of stocks or bonds. Even better, IRA CDs are insured by the FDIC up to a specified amount.

If you’re looking to have the most impact with every bank deposit, consider how much you can deposit, for how long, and what your spending and savings goals are. Whether you need easy access to cash at an ATM, or you want to save for retirement and you don’t plan to access funds until then, there is a product that can make the most of your funds. Whichever option you choose, depositing cash in a bank is safer and more profitable than keeping it at home.