Type of account that typically has the highest interest rate is Certificate of Deposit. It is due to Certificate deposit has the least flexibility in terms of the usage. The customer should wait until the moment of the deposit reach its maturity. If they withdraw before the maturity time, then the customer should pay the penalty.
A Checking Account or demand account or transactional account
Checking account is the account within a bank that gives the possibility to customer to withdraw it anytime he/she wants. This transactional account usually used to pay the monthly bill and connected to your debit card.
B Savings Account
Saving account is an independent account that separates your deposit with the transactional account. Usually, every bank gives their customer a kind of comfort to divide the customer deposit into transactional and savings account. The interest rate of savings account is higher than transactional account. However, the customer can transfer their savings account to a transactional account anytime.
C Money Market Account
Money Market account is an account that combines the savings account and transactional account. In this term, the owner of this account gives a right to the bank or investment bank to use their money and be invested in the low-risk financial instrument such as the National treasure bill or other low-risk investment. The Money market account requires the customer to have a minimum account. Sometimes bank sells the money market account in retail with a different type of prices depend on the risk and yield.
D Certificate of Deposit (CD)
Certificate deposit is a type of account that is stored to the bank. This deposit has the least flexibility in terms of withdrawal. It is due to the usage of the money to be a primary fund of the bank to loan other debtors. For example, if some company want to borrow money to run their business, then usually bank use the funds from the deposit to be their first loan. During the financial crisis, there is a phrase that named as unbalance maturity, where bank fund some of long term infrastructure development by short term certificate of deposit.
Grade: 12
Subject: Economy
Subchapter: Type of savings
