Bank Account: Meaning and Types

A bank account is the arrangement made with a bank which enables one to deposit and withdraw money and in some cases, be paid some interest.

There are basically three types of bank accounts and we shall look at them in the following paragraphs below.

Types of Bank Account

1. Savings Account

This is the most common form of bank account to the low income group and its main objective is to encourage people to form saving habits.

2. Current Account

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 The money paid into this account can be withdrawn anytime and as many times as possible in a month.

Current accounts are operated with the use of cheques. 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.

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

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is always meant for specific purposes for the owners and must last for at least six months or more before it can be withdrawn. Before the money in fixed deposit account is withdrawn, the bank must be given 7 to 14 days notice.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