How to choose your bank accounts

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December 20, 2012
Bank accountsBefore the money system came into existence, the barter system was being followed all over the world – it was an absolutely simple system without any headaches – you could exchange a bag of grain for a sheep or two, a bag of rice for something else, and so on. After the advent of the money system, things changed dramatically and rather drastically – and life was not the same again for he could now think of saving something for a rainy day. With the invention of money, came the concept of saving. And, before the concept of banking, as we see it in the present day came into being, everyone would have heard of their fathers and forefathers, before them, hiding money in all the conceivable and inconceivable places – in pots and pans, under a tree, or somewhere in the fields.The money system was introduced and for it to be developed it was necessary to keep the system secure in such a way that money could not be easily stolen. It was thus that an intricate financial system came into existence and was more and more developed. Now, in plain terms what is it that banks do? The answer is very simple – accept deposits and keep the money safe for you, and lend money to people who require loans and qualify for them. Today, we find that changes which have taken all around us has also invaded the banking industry and we see banks with the finest state-of-the-art technology with the most sophisticated systems. Banking has come a very long way from the banking of yesteryears to today’s electronic money transfers and instant cash. People have implicit trust in the banks and would rather keep their money in there than anywhere else.

Banks money to people for their various needs – to open a business, to start an industry, to build a house, or for any other reason. And, if the banks have to make a profit they will have to charge higher rates of interest on the money they lend to enable them to pay interest to depositors and make a profit.

Step into any bank and look at the wide range of services that they have to offer. Should you desire to open a deposit account, take a look at the wide range of accounts that the bank has, and choose the one to suit your needs.

Current Accounts

If you desire to open an account for business purposes, you can open a Current Account which is also known as Cheque Account or a business account. The account holder can deposit money into the account and withdraw it any time he likes. He can issue cheques to his vendors, creditors, or to any person to whom he has to make payments. ATM cards can also be used to draw money, make payments to others, or to make purchases. Most of the banks do not pay interest on these accounts, but banks do levy bank charges to customers for making use of the banks facilities. Most of the banks stipulate a minimum balance to be maintained in the current account.

Savings Accounts

Customers can open these accounts to keep money for a short time or for short-term savings. Banks curtail the amount and number of times a savings customer can withdraw from the account. A few banks do issue cheque books for savings accounts, though almost all banks offer ATM cards to their customers. Banks stipulate a minimum amount to open the account and the same amount to be maintained in the account at all times. Charges are levied on those accounts which do not maintain the minimum balance and such accounts, if not operated, would be closed down. Savings accounts do earn some interest for the account holders, but the number of withdrawals and the amounts withdrawn are restricted depending on the bank.

Fixed Deposits or Time Deposits

Fixed deposit accounts are also known as time deposit accounts. These time deposit or term deposit accounts could be of various types – Fixed deposit accounts, Short deposit accounts, and Certificate of deposits, and the rate of interest varies according to the period. Amounts that are deposited for a longer period earn a higher rate of interest as opposed to deposits for shorter periods.

Time deposits are investments that are placed in the hands of the bank and are not easily accessible by the investor till the maturity date of the deposit. The investor gets a fixed interest at the end of the investment period, and the rate of interest is higher for longer periods than short-term periods. But, you should remember that very long-term deposit many not earn a very attractive rate of interest as compared to mid-term deposits. After the due date, the investor has the option of taking back the deposit or re-investing it for a further period.

In Kenya, as in many other countries, depositors are levied a penalty if they withdraw their funds before the due date. Sometimes, it happens that the investor not only loses the contracted interest, but he even has to forego a part of the principal amount as penalty.

Learn to make your investment work for you and earn interest for you. Always, look at investment options that can earn a higher rate of interest for you.

Entrepreneurial Learning

Many people wonder what is it that banks do? The answer is very simple – they accept deposits and keep the money safe for you, and lend money to people who require loans and qualify for them. Today, we find that changes which have taken all around us has also invaded the banking industry and we find that banks have the state-of-the-art technology with the most sophisticated systems. Banking has come a very long way from the banking of yesteryears to today’s electronic money transfers. People have implicit trust in the banks and would rather keep their money in there than anywhere else.

Image courtesy: FreeDigitalPhotos.net

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