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Bank Account

This document provides information about different types of bank accounts and deposits. It discusses savings accounts, recurring deposit accounts, and the advantages and disadvantages of each. Savings accounts allow customers to set aside funds while earning interest, but have low returns, withdrawal limitations, and minimum balance requirements. Recurring deposit accounts allow customers to make fixed monthly deposits over a fixed period, with a fixed interest rate. They are a disciplined way to save, but funds cannot be withdrawn instantly if needed. Overall, the document outlines the key features of various deposit accounts available from banks.

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344 views4 pages

Bank Account

This document provides information about different types of bank accounts and deposits. It discusses savings accounts, recurring deposit accounts, and the advantages and disadvantages of each. Savings accounts allow customers to set aside funds while earning interest, but have low returns, withdrawal limitations, and minimum balance requirements. Recurring deposit accounts allow customers to make fixed monthly deposits over a fixed period, with a fixed interest rate. They are a disciplined way to save, but funds cannot be withdrawn instantly if needed. Overall, the document outlines the key features of various deposit accounts available from banks.

Uploaded by

Dheemahi 13
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BANK ACCOUNT

A bank account is a financial account between a bank customer


and a financial institution. A bank account can be a deposit account,
a credit card, or any other type of account offered by a financial
institution. The financial transactions which have occurred within a
given period of time on a bank account are reported to the customer
on a bank statement and the balance of the account at any point in
time is the financial position of the customer with the institution. a
fund that a customer has entrusted to a bank and from which the
customer can make withdrawals.

BANK
A bank is a financial institution and a financial intermediary that
accepts deposits and channels those deposits
into lending activities, either directly by loaning or indirectly
through capital markets. A bank links together customers that have
capital deficits and customers with capital surpluses. The
word bank was borrowed in Middle English from Middle
French banque, from Old Italian banca, from Old High
German banc, bank "bench, counter". Benches were used as desks
or exchange counters during
the Renaissance by Florentine bankers, who used to make their
transactions atop desks covered by green tablecloths.

Advantages of banking
Commercial banking can help a small business by making it easier
to manage day-to-day financial tasks. An established commercial
account with a bank will make it easier to borrow money when you
grow your business. Often a business is assigned a representative
who works directly with the company to find the best services and
solutions for the issues the business is facing.  Some banks offer
retirement account management for your employees as well as
other employee benefits. 

Disadvantages of banking
Commercial banking or business accounts are often more
expensive than traditional bank accounts. Banks may charge fees
for night deposits, for processing a certain number of checks and
for the payroll services. Depending on the size of your business,
some of the services offered may not be needed, and you may still
be charged for the services even if you're not fully using them.

TYPES OF ACCOUNTS

Saving accounts--- are accounts maintained by retail financial


institutions that pay interest but cannot be used directly as money in
the narrow sense of a medium of exchange (for example, by writing
a cheque). These accounts let customers set aside a portion of their
liquid assets while earning a monetary return. For the bank, money
in a savings account may not be callable immediately and in some
jurisdictions, does not incur a reserve requirement, freeing up cash
from the bank's vault to be lent out with interest. The other major
types of deposit account are transactional account (checking
account or current account by country), money market account,
and time deposit.

ADVANTAGES OF Saving accounts


1.Keeping your money liquid
Savings accounts and money market accounts allow you to
withdraw your money at any time, which is rarely an option with
CDs or long-term investment options. Savings accounts allow for
unlimited withdrawals Nevertheless, you can access the money in
your savings account when you need it most.
2.Get started with minimal cash
If you don't have a lot of money to invest, you can begin your saving
habits using a savings account. Savings accounts usually require a
minimum amount to get started,
3.FDIC or NCUSIF insured
Your money is extremely safe in a savings account or money
market account, making it a great location for secure saving
4. High-yield savings options
Some savings accounts offer higher interest rates than others.
These high-yield options listed on Bankrate.com are ideal for long-
term saving, such as emergency funds. Most of these high-yield
savings accounts are strictly online, which decreases the bank's
overhead, allowing for these higher interest rates. 

DISADVANTAGES OF Saving accounts                        


Low Returns:-
A main drawback of a basic savings account is a limited interest
yield. Typical savings funds earn well below 1 percent in interest
These accounts are not the best place to grow your wealth if you
have more money to invest beyond your short-term emergency
needs.
Withdrawal Limitations:-
Another limitation of savings accounts is standard regulatory
requirements on the number of withdrawal transactions you can do
per month. Basic savings accounts usually allow up to six transfers
in a month
Minimum Balance Requirements:-
Savings accounts usually have minimum initial deposit and average
balance requirements tied to interest yields. You can often get
accounts with no deposit and no minimum balance requirements,
but yields are miniscule and you usually pay monthly account fees
between $5 to $10.

RECURRING DEPOSIT ACCOUNTS=Recurring Deposits are a


special kind of Term Deposits offered by banks in India which help
people with regular incomes to deposit a fixed amount every
month into their Recurring Deposit account and earn interest at the
rate applicable to Fixed Deposits.[1] It is similar to making FDs of a
certain amount in monthly installments, for example Rs 1000 every
month. This deposit matures on a specific date in the future along
with all the deposits made every month. Thus, Recurring Deposit
schemes allow customers with an opportunity to build up their
savings through regular monthly deposits of fixed sum over a fixed
period of time.
The Recurring Deposit can be funded by Standing
instructions which are the instructions by the customer to the bank
to withdraw a certain sum of money from his Savings/ Current
account and credit to the Recurring Deposit every month.
When the RD account is opened, the maturity value is indicated to
the customer assuming that the monthly installments will be paid
regularly on due dates. If any installment is delayed, the interest
payable in the account will be reduced and will not be sufficient to
reach the maturity value. Therefore, the difference in interest will be
deducted from the maturity value as a penalty. The rate of penalty
will be fixed upfront. Interest is compounded on quarterly basis in
recurring deposits. One can avail loans against the collateral of
Recurring deposit up to 80 to 90% of the deposit value. Rate of
Interest offered is similar to that in Fixed Deposits. At present it
seems to be one of the best method to save the amount yield after
years of deposit because TDS is not applicable on RDs. Taxation of
Recurring Deposit Tax Deducted at Source ( TDS ) is not applicable
on RDs. However interest from RD is not tax free. Income tax is to
be paid on interest earned from a Recurring Deposit at the rate of
tax slab of the RD holder .

Advantages of a recurring deposit:


Fixed monthly investment: In recurring deposit, you invest a fixed
amount every month. It is very similar to paying the EMI. You can
start with less amount. In many banks you can start it with monthly
investment of as low as Rs. 100..
Fixed duration: You can go for a recurring deposit option for a fixed
tenure. In most of the banks, you may choose maturity period
ranging from 6 months to 10 years.
Fixed rate of interest: Rate of interest in a recurring deposit is fixed.
It remains the same for the entire duration of the recurring deposit.
This interest rate varies from bank to bank and tenure of recurring
deposit. Most of the banks offer it between 3.75% and 9.5%.

Disadvantages of recurring deposit: In case of urgency, money


can not be withdrawn instantly.

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