Checking account is a type of investment to manage personal finances that has both advantages and disadvantages. The primary advantages of checking are to save fees charged by storefronts that offer check cashing services and easy accessibility to funds by writing on checks compared to carrying cash. The disadvantages of checking accounts are overdraft fees when the balance is less than the maintaining balance and less security than ATM cards since it only requires a signature.
Money market account offers advantages to account holders to hold emergency funds and money for periodic payments. A higher rate of interest is also offered compared to other types of accounts. Its disadvantages are limited transactions to only 3 deposits and 3 withdrawals every month; potential investment loss since only $250,000 is insured by FDIC; unguaranteed interest rate due to fluctuation; risk of spontaneous spending due to easy accessibility; and risk of withdrawing funds leading to a minimum balance especially when the account is tied to a checking account.
Passbook savings account offers the advantages of safety as covered by U. S. federal government insurance companies (FDIC and NCUSIF); immediate access to funds based on the needs of the account holder; and it offers a fairly small interest. Its disadvantages are the limitation on federal insurance of a maximum of $250,000 coverage and the lowest interest rate of passbook accounts compared to all types of savings account. The interest also is subjected to tax returns for the depositor. Certificate of deposits additionally has advantages and disadvantages.
It offers flexibility of the terms starting at three months up to five years or more. It means the longer the term, the higher interest rate the depositor will receive at the end of the term. Another advantage is the grace period it offers. Depositors are given commonly a seven-day period to come to a decision whether to extend the term or not. Its disadvantages are the interest rate is fixed, penalty fees when the deposit is withdrawn before maturity date, and automatic rollover when the depositor missed to make a decision on or before the grace period.