• Ryan P. Cleary

Float Finance 2.2: Deposit and Credit Products


In this article we will discuss how your needs should determine which financial products and services you should select. You should consider your needs and shop around for different financial products and services.


Float Finance is a series of accessible articles, tools, and resources designed to empower early career employees and students to navigate their financial journey.


Products and Services Available at Financial Institutions


Financial institutions offer three general types of products and services:

  • Deposit products (such as checking and savings accounts)

  • Credit products (such as loans and credit cards)

  • Other products and services (such as cashier’s checks and money orders)

In this article, we'll focus on the first two categories.


Deposit Products

Deposit products include savings accounts, checking accounts, certificates of deposit, and money market accounts. With both checking and savings accounts, direct deposit allows your money to be safely and securely electronically deposited into your account.


Savings Accounts

Savings accounts are usually used to set money aside for the future. People usually use savings accounts for money they do not expect to need or use on a regular basis. In fact, there are generally limits on how often you can take money out of a savings account without incurring a fee. There are generally no limits to how often you can deposit money into a savings account. Money in a savings account earns interest at a higher rate than in a checking account.


Checking Accounts

A checking account is a “transaction” or “spending account.” It is designed for individuals to deposit money into it, and take money out of it frequently. People usually use checking accounts to keep their money available for paying bills and withdrawing money for regular use. Money in a checking account may earn interest, but usually these accounts require lots of money to be deposited or have higher fees.


Certificate of Deposit (CD)

A certificate of deposit (CD) is used to set money aside for the future. It is not the same as a savings account. You need to keep money in a CD for a certain period of time or you will likely have to pay a penalty or lose some or all of the interest you earned (but you can withdraw your funds early if you need to). The required time could be one month to five years or more. There may be a required minimum deposit. CDs typically offer a higher rate of interest than regular savings accounts.


Money Market Accounts

Money market accounts may also be offered by some financial institutions. These accounts usually pay a higher rate of interest and require a higher minimum balance than some other account options. They also do not require that the money remain on deposit for a certain period like CDs do. However, they carry some additional risks which CDs or savings accounts may not have- you should talk to your financial institution and carefully consider all the risks and rewards these types of accounts have.



Credit Products

With Credit products you can easily borrow money from a financial institution. You will usually pay interest on the amount you borrow, though some products

Credit products include:

  • Credit cards

  • Lines of credit

  • Installment loans

  • Mortgages


Credit Cards

Credit cards are revolving credit. That means you can borrow money over and over again up to your credit limit as long as you pay at least the minimum payment amount by the due date shown on the monthly credit card statement.


Lines of Credit

Lines of credit are similar to a credit card and allow you to borrow money up to a certain amount. They are offerred directly by the financial institution but may or may not have a card.


Installment Loans

Installment loans are generally repaid in equal payments over a number of months or years. They can be used to finance consumer items, such as appliances, cars, trucks, education, or personal expenses. The final payment on some installment loans may be different than the regular payment amount.

Mortgages

Mortgages are loans secured by your home, usually to purchase it or refinance an existing mortgage. They are usually installment loans. Mortgages often carry additional requirements compared to regular installment loans.

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