Bank accounts are separated into several types, and each has a different purpose and specific features. Most banks offer almost similar to bank account holders.
But, when it comes to interest rates, there are different types of banks and bank accounts that offer different interest rates.
While some banks and some types of bank accounts offer attractive interest rates. But there are other types of bank accounts and banks that provide minimal returns.
We will discuss each account with the lowest interest rates in this article. Hence, it is important to make the right choice while opening a bank account.
Types of Bank Accounts
Before we continue, here are some examples of common types of bank accounts:
- Savings Accounts: Savings accounts are used to deposit and save money and offer low-interest rates. But the money is easy to access and is suitable for short-term savings goals and emergency funds.
- Current Accounts: Current accounts, also known as checking accounts, are primarily used for day-to-day transactions. They offer facilities like cheque-writing, debit cards and online banking for convenient access to funds. However, they usually do not provide any interest.
- Checking Accounts: Checking accounts, similar to current accounts, are used for everyday banking activities such as paying bills, making purchases, and withdrawing cash. These accounts provide the convenience of accessing your funds through various channels, such as cheques, debit cards, and online banking. However, checking accounts usually offer very low-interest rates.
- Money Market Accounts (MMA): Money market accounts are a hybrid between savings and checking accounts. They offer slightly higher interest rates than regular savings accounts. MMAs often require high minimum balances and may have limited check-writing capabilities.
- Certificate of Deposit (CD): CDs are fixed deposit accounts in which you are required to deposit a fixed amount for a fixed period ranging from a few months to several years. They offer higher interest rates than savings accounts but come with penalties for early withdrawals.
- Individual Retirement Accounts (IRAs): IRAs are special accounts for retirement savings and provide tax benefits. Funds are invested in stocks, bonds, mutual funds, or other investment plans. Different types of IRAs such as Traditional IRAs, Roth IRAs, and SEP IRAs.
- High-Yield Savings Accounts: High-yield savings accounts are similar to regular savings accounts but offer higher interest rates. They may have certain requirements to earn a higher interest rate, such as maintaining a minimum balance or limiting the number of withdrawals.
- Joint Accounts: Joint accounts are shared by two or more individuals, allowing them to pool their funds. They are commonly used by couples, family members or business partners to collectively manage finances.
- Student Accounts: Student accounts are specially for students. They often come with benefits such as low fees, high withdrawal limits and additional services tailored to suit the needs of the student.
- Business Accounts: Business accounts are for the banking needs of businesses and organizations. They offer features like separate account management, merchant services, and business loans.
- Online Banking Accounts: Online banking Accounts are completely digital, allowing customers to manage their finances through online platforms or mobile apps. These accounts often offer competitive interest rates and convenient banking services.
Types of Bank Accounts That Offer Low Interest
| S-No | Type of Account | Rate of Interest (APY) |
|---|---|---|
| 1 | Savings Accounts | 1.00% to 5.00% |
| 2 | Current Accounts | 0.00% |
| 3 | Checking Accounts | 0.10 % to 4.20 % |
| 4 | Money Market Accounts | 0.05% to 4.24% |
| 5 | Certificate of Deposit Accounts | 3.75% to 5.75% |
| 6 | Individual Retirement Accounts | 2.25% to 5.00% |
| 7 | High-Yield Savings Accounts: | 4.00% to 5.50% |
| 8 | Joint Accounts | 0.10% to 3.30% |
| 9 | Student Accounts | 0.01% to 0.25% |
Benefits of Savings Account
Savings accounts are one of the most common types of bank accounts individuals use to save money. However, in terms of interest rates, they often offer the least return on your investment.
Traditional savings accounts tend to have lower interest rates compared to other types of accounts due to their low-risk nature.
These accounts are typically offered by commercial banks and credit unions, and while they provide a safe place to store your money, their primary purpose is to provide liquidity rather than generate substantial interest income.
Benefits of Current Account
Current accounts are designed for day-to-day transactions, allowing easy access to your funds. However, in most cases, current accounts do not offer any interest on the deposited funds or provide minimal interest rates.
Banks typically do not pay interest on current accounts because they expect the funds to be actively used for transactions rather than being held for saving purposes.
Therefore, if you are looking to grow your money, a current account is not the ideal choice due to its lack of interest rates.
Benefits of Checking Accounts
Checking accounts, similar to current accounts, are primarily used for everyday banking activities such as paying bills, making purchases, and withdrawing cash.
These accounts provide the convenience of accessing your funds through various channels, such as checks, debit cards, and online banking.
However, checking accounts usually offer negligible interest rates, if any at all. Similar to current accounts, the focus is on transactional use rather than maximizing interest earnings.
Therefore, if you aim to earn significant returns on your savings, it is advisable to explore other account options.
Benefits of Money Market Accounts
Money market accounts (MMA) are a bit like savings and checking accounts. But offer a slightly higher interest rate than traditional savings accounts.
MMA usually requires a higher minimum balance. They invest your funds in short-term, low-risk securities such as certificates of deposit (CDs) and government bonds, which generate interest income.
So returns on MMAs are generally higher than traditional savings accounts yet they offer modest interest rates compared to other investment options such as certificates of deposit or mutual funds.
FAQs
A current account offers the lowest interest rate.
Savings and Checking Accounts offer the lowest interest rate other than the current account.
A money market account and a high-yield savings account is the best account that offers high-interest rates.
Conclusion
When it comes to bank accounts that pay the least interest, savings accounts, current accounts, and checking accounts generally have the lowest interest rates.
These accounts prioritize liquidity and convenience rather than providing interest income. If you want to grow your savings, you can explore alternative options, such as certificates of deposit or investment accounts.
