Review these common types of savings accounts.
With this account, you’re allowed to put money in — make a deposit — or take money out — make a withdrawal. To keep your account open, the bank may require you to keep a certain amount of money in the account, called a minimum balance, at all times. They will also limit the number of times you can withdraw money each month. But on the positive side, the bank pays interest on your money, either every month or quarterly, meaning four times a year.
Like a regular savings account, a money market account also pays interest. It may require a higher minimum balance, but it offers two extra advantages. First, you receive checks you can use to make withdrawals. There are restrictions on the number of withdrawals made by check, but the ability to write a check is very convenient. The second advantage is that money market accounts generally have higher interest rates than regular savings accounts.
Certificates of deposit, or CDs, require you to keep your money in an account for a fixed period of time, from perhaps a few months to five or more years. This period of time is called the term. The interest you earn on CDs is generally higher than on a regular savings or money market account. The bank rewards you with higher interest because you are allowing them to use your money for a longer term. If you withdraw your money before the end of the term, you may have to pay a penalty.
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