INTEREST RATE SAVINGS: WHAT ARE YOUR CHOICES?

2007-03-08 10:33:40

( Financial )



Interest rate savings are savings accounts offered by banks to its depositors that allows them to withdraw and deposit money into it and earns interest. The interest serves as the bank’s payment for putting your money in their accounts that it used to lend out money to their other clients in the form of loan products.

Interest rate savings are computed based on the average daily balance of your savings in the bank. The bank provides you a periodic statement to update you on the transactions on your interest rate savings account.

Types of Interest Rate Savings Account

There are various type of interest rate savings account that you can consider investing your money for safekeeping and earning potentials. Bank savings account, money market account, certificate of deposits and money market funds.

Bank Savings Account

Bank savings account is the safest and easiest way you can put your money and earn interest in the process. The federal government guarantees these accounts through the Federal Deposit Insurance Corporation that insures your money and pays you certain amount if you lost your money in case the bank gets into trouble.

Money Market Accounts

Money market accounts are offered by banks and invest your deposits in money market. It is considered high interest savings but also offers risk to your deposits according to the performance of the money market where your deposits are invested. Banks, however, are usually efficient in investing in money market accounts to ensure that earning potential is consistently growing.

Certificate of Deposits

Certificate of deposits lock your money with the bank for a certain period. It means you cannot withdraw from your funds for the specified period. Withdrawal fees are charged when you withdraw your money prior to the end of the specified lock up period.

Money Market Funds

Money market funds are usually offered by Mutual Fund Companies. It is similar to bank savings accounts but provide better earnings for your money since they are invested in short term bonds, government investments and corporate commercial papers. Money market funds, however, are not insured with the Federal Deposit Insurance Corporation.

Whatever types of savings accounts you choose, make sure that your earning potential is higher and your investment is diversified to protect you from future risks.


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