What Are the Different Types of Interest-Bearing Accounts?

K.C. Bruning

Some of the most common types of interest-bearing accounts are savings, money market, and time deposit. There are also some kinds of checking accounts which offer interest. Though each of these options varies in structure and requirements, they all tend to be low-yield accounts. Many people invest in two or more of these types of accounts.

Savings account bear interest on the amount of money deposited.
Savings account bear interest on the amount of money deposited.

Savings tends to be one of the most popular types of interest-bearing accounts. Many banks will charge a monthly fee unless a certain amount of money is kept in the account. There are also often restrictions on the number of withdrawals that can be made in a month. Overall, this is one of the most simple and easily accessible types of interest-bearing accounts.

Some types of checking accounts offer interest.
Some types of checking accounts offer interest.

A money market account is similar to savings, though it typically has more restrictions and a slightly higher yield. Like a savings account, a money market usually has a minimum investment requirement, though it is usually a higher amount. It also has restrictions on the number of withdrawals allowed per month. Many money markets are fairly easily to access via check, debit card, or bank transfer.

There are also interest-bearing accounts for checking, though these tend to have the lowest yield. This is primarily because there is no limitation on the number of monthly withdrawals that can be made and often no minimum balance. While it is not likely an investor will make significant gains with this kind of account, it is one way to maximize the earning power of idle cash.

One of the least accessible types of interest-bearing accounts is the time deposit. This kind of account requires the investor to deposit a certain amount of money for a predetermined time frame. It can be used by investors who want to make money on idle cash, but are reluctant to invest in equities.

At the time of a time deposit investment, the bank will often lock in an interest rate. When the investor cashes in the account, the gains will be based on that rate. This protects the investor from losses if the interest rate drops, but it also prevents gains if the rate increases.

A time deposit account can be open from several months to a few years. The longer the funds stay in the account, the higher the interest rate will be. If funds are removed before the pre-determined end date, the investor will often lose any interest paid on the funds. Many banks will also issue a penalty fee for early removal of funds.

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