Types of Bank Account

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Types of Bank Account

A bank may be defined as a financial institution set up purposely for safe-keeping of money, valuable goods and documents like wills and others. The existence of banks has been a big boost to business activities the world over.

Types of Bank Account
Types of Bank Account

They help to oil the wheel of business activities by making money available which is the essential ingredient of business; There are different types of banks like Central, Commercial, Industrial, Merchant, Savings, Development, Mortgage, etc.

Major Types of Bank Accounts

1. Savings Account

This is the most common form of bank account to the low income group and its main objective is to encourage them to form saving habit. This type of bank account is operated with the use of passbook and interest is paid to their owners. The amount used in opening this account and the percentage of interest payable, vary from bank to bank.

This account which is also common among students and undergraduates has two as the maximum number of times the owner can withdraw money in a month from it in some banks.

If withdrawals are more than twice in any month, it means the owner is operating it like current account and will therefore not attract any interest in that month. The interest is calculated either monthly, quarterly or yearly.

2. Current Account

This is the type of bank account that is commonly used by the businessmen and other groups of individuals and organisations that frequently make use of money. The money paid into this account can be withdrawn at anytime and as many times as possible in a month.

Current accounts are operated with the use of cheques, and cheques paid into them mature after four working days before the cash can be withdrawn.

This type of account does not attract any interest rather, the owner pays commission to the bank for its services. Because of the crucial nature of this type of bank account, people proposing to open it must be identified by at least two persons that are known to the bank or those who own this type of account in the bank or other banks.

This is because banks are normally duped through this type of account. Owners of this type of account enjoy some privileges like overdraft, bankdrafts and other cheques are paid into it, as well.

3. Fixed Deposit Account

This type of account is also known as time deposit because, money is deposited in it for specific period of time. Individual and organisations that have excess money in their current accounts use part of the money in opening this type of account.

Money deposited in this type of account is always meant for specific purposes for the owners and must last for at least six months or more before it can be withdrawn. Before the money in fixed deposit account is withdrawn, the bank must be given between 7 to 14 days notice.

The bank issues receipt or deposit account passbook and also pays interest to the owners of fixed deposit account, which is equally fixed depending on the amount one deposits.