Money Savings Account

 

Money-Market Deposit Accounts

What they are and how they work

  • Checking/savings account.
  • Interest rate paid built on a multifaceted makeup that fluctuates with size of balance and current level of market interest rates.
  • Can obtain your money from an ATM, a teller, or by writing up to three checks a month.

 Benefits

  • Instant access to your money.

 Trade-offs

  • Typically requires a minimum balance of $1,000 to $2,500.
  • Limited number of checks can be written each month.
  • Average yield (rate of return) higher than regular savings accounts.

 

Certificates of deposit (CDs)

What they are and how they work

  • Bank pays a fixed amount of interest for a fixed amount of money during a fixed amount of time.

Benefits

  • No risk
  • Simple
  • No fees
  • Offers higher interest rates than savings accounts.

Trade-offs

  • Limited access to your money Withdrawal penalty if cashed before expiration date (penalty might be higher than the interest earned)

 Types of certificates of deposit

1. Rising-rate CDs with higher rates at various intervals, such as every six months.

2. Stock-indexed CDs with earnings based on the stock market.

3. Callable CDs with higher rates and long-term maturities, as high as 10–15 years.But keep in mind, the bank may “call” the account after a stipulated period, such as one or two years, if interest rates drop.

4. Global CDs merges higher interest with a hedge on future changes in the dollar compared to other currencies.

5. Promotional CDs tries to attract savers with gifts or special rates.

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