Investors often deposit their money into bank accounts, credit unions and other types of financial institutions. Several types of deposits exist for investors. Many financial institutions allow you to make deposits at the physical location or online. As of 2012, the Federal Deposit Insurance Corporation (FDIC) guarantees all deposits up to $250,000 per user, per account made at banks insured by the FDIC. This means if your bank goes under, the FDIC will pay you for your deposits up to the $250.000 limit. Investors must understand the different types of deposits and rules surrounding them to best protect their money.
Counter deposits are made at your bank’s physical branch. You deal directly with the staff at your bank when making counter deposits, which is especially helpful if you have questions or concerns regarding your account. A bank teller usually requires you to complete a bank deposit slip, which includes space to fill out basic information about your account. Your account number is typically needed, but most banks allow you to make deposits without it if your have valid identification.
Direct deposits are funds electronically transferred into your checking or savings account by your employer. The advantage of direct deposit is that you receive your money quickly and you do not need to worry about lost or stolen paychecks. The disadvantage is funds are automatically deducted from your wages if your account is garnished. You must establish direct deposit through your employer and financial institution. Most employers request a voided check and your Social Security number. An actual direct deposit may take several weeks to hit your account after setting it up.
Certificate of Deposit
A certificate of deposit (CD) gives investors a low-risk option of earning a higher interest rate than most savings accounts. When you invest in a CD, you deposit a fixed amount of money for a predetermined time period. The bank you invest with agrees to make interest payments to you according to the interest rate of the CD. The time period for CDs can range from several months to several years. You are supposed to keep your money invested for the life of the CD. If you withdraw your money early, the financial institution deducts a fee for early withdrawal from your invested funds.
Another method to make electronic deposits is through the Internet. Online deposits involve moving money from one account to another. If the two accounts involved in the online deposit are with the same bank, you usually do not need to pay a transfer fee. In most cases, the deposit is also instant. Making online deposits between two accounts at different banks depends on the banks’ policies. You may experience a waiting period to access your money when making a transfer involving accounts from different banks.
- Federal Deposit Insurance Corporation: FDIC Insurance Coverage Basics
- TD Bank: FDIC Coverage of Accounts
- Bankrate: Direct Deposits: How it Works
- U.S. Securities and Exchange Commission: High-Yield CDs – Protect Your Money by Checking the Fine Print
- The International Deposit Rates Exchange: Counter Deposits
- Wells Fargo: Transfer Questions
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