Interest Bearing Accounts

Money that is invested in an interest bearing account such as a savings account or certificate of deposit earns interest. The rate at which interest is paid varies, but it will be a small percentage of the balance in the account.

Rates may be either variable or fixed. Fixed rates remain the same, but variable rates are tied to the wider economy and may go either up or down. If you want to place your savings in an interest bearing account, then you should shop around in order to get the best rate of interest.

Some interest bearing accounts require investors to pay fees. If you are considering taking out such an account, you should ensure that the amount of interest being earned is greater than the cost of the fees, otherwise you will be losing money on the account.

Interest bearing accounts are one of the safest ways to invest your money. There is no element of risk involved and the money you deposit in the account remains safe, even if the interest being earned is variable. The potential gains may be higher with investments such as stocks and shares, but the potential losses are also much worse. The money that is placed into an interest bearing account is safe. If it is left in the account, the interest will gradually accumulate. Essentially, a small amount of money can be made, without risking a loss.

Your money will be completely safe as long as the bank with which you have invested it remains in business. If you choose a bank that has been insured by the FDIC, then your investment will be secure even if the bank should fail.

Savings accounts are usually the most convenient type of interest bearing accounts since there are usually fewer limitations on deposits and withdrawals, although this depends on the account. Some savings accounts come with ATM cards.

A certificate of deposit (sometimes known as a CD) is a fixed term investment. This means that when a CD is opened, the investor agrees to keep their money in it for a specified period of time, which could be anything from three months to five years or more. The longer the investment period, the higher the interest rate that will be offered. If you decide to withdraw your money before the specified date, you will be required to pay a penalty fee, which will usually be the equivalent of three months worth of interest. This means that if you need to access your savings in an emergency, you will have to pay to do so.

Banks can link interest bearing savings accounts, certificates of deposit and checking accounts. This can make it easier to organize your money. It is also possible to have an interest bearing checking account.



Comments are closed.