How many types of Bank Account

All Banks receive deposits ammount in account from the customers and this is the major source of its cash or funding. Deposit account is an account thats enables the money to be kept in the bank on behalf of the customer or account holder. Every account holder has an account which he uses to store his money with the bank. Deposit account can be of mainly 2 types are they are

• Demand Deposit Accounts
• Term Deposit Accounts

DEMAND DEPOSIT ACCOUNTS:

Demand Deposit accounts are whose deposit accounts which enables the account holder to withdraw money anytime based on the demand.  As per the definition, demand deposit accounts provide more flexibility to the account holders in terms of withdrawing money whenever they want. Different types of deposit accounts are as follows:

Savings Account: This is the most popular demand deposit account which enables the account holders to save their surplus money and earn nominal interest rate on the same. Nowadays lots of extra services are being offered along with a savings account in order to attract more customers.

Negotiable Order of Withdrawal (NOW) Account: This is mainly available in USA which pays interest, on which Cheques may be written. These accounts are structured to comply with Regulation Q which prohibits interest payment on checking accounts.

Money Market Account: This is a special type of deposit account which has a relatively high interest rate but requires a higher minimum balance to be kept in the account to earn that higher interest rate. Failing to keep the higher minimum balance attracts monthly fees from the account holders. This is almost same as savings accounts but used to attract customers with high net worth.

Current Account: This is a deposit account where there are no restrictions on the number of times money can be withdrawn and also the bank does not pay any interest on the balance maintained in this account. This is also known as transaction account in US as it facilitates higher number of transactions for the respective account holders.

TERM DEPOSIT ACCOUNTS:

Term deposit accounts are the specific deposit accounts for which account holders can withdraw money only after a specified period of time. These accounts are also known as fixed deposit due to fixed tenure involved in the same and money cannot be withdrawn for a fixed period of time before the maturity date under normal circumstances. The interests earned on these accounts are relatively higher than the normal savings deposit accounts as money is blocked with the banks for higher duration. Different types of term deposit accounts are specified below

Fixed Deposits: Fixed deposits enables account holders to save their surplus money for a fixed tenure which offers them higher rate of interest. The interest rate and maturity date are fixed earlier and the interest rate is considerably higher than the saving account interest rate. In some countries, fixed deposits are encouraged to increase savings by offering tax benefits by the Governments.

Certificate of Deposits (CD): Certificate of deposit is a special type of term deposits which enables the CD bearer to earn interest on the amount specified in the Certificate of Deposit. A CD has a maturity date, a pre-fixed interest rate and can be of any value which is issued by commercial bank and insured by the FDIC (Federal Deposit Insurance Corporation) in US.

Retirement accounts: Retirement account is another type of term deposit accounts offered by the banks which enables the customers to save money to use them after their retirement. It also offers tax benefit to encourage people to save for their future. These accounts are mostly used by the employers to deposit pension money for their employees.