Call Deposit Account
Categories: Derivatives, Accounting, Trading, Stocks, Bonds, Managed Funds
Even though you may never write a check anymore, most of us are familiar with checking and savings accounts at a bank. We are also familiar with the very low interest rates offered by most savings accounts these days, so it's worth looking at two other types of accounts that will pay a higher interest rate, though you earn this additional interest in exchange for less access to your cash.
One of them is a certificate of deposit (CD), which pays a set interest rate on a minimum amount of money for a particular time period (usually, one to five years).
The other savings alternative is known as a call deposit account. These accounts require you to keep a minimum amount in exchange for that higher interest rate. With a CD you won't have access to any of your money until the time period is up without paying a penalty. But with a call deposit account, you can always change your mind if you need access to your cash to pay an unexpected bill.
However the minimum daily balance that call deposit accounts require could be $1,000 or more, which can be a lot of money to tie up if the interest rate isn't great. It's always a good idea to compare rates in other types of accounts such a money market, a CD or an investment in a stock, depending on how liquid (spendable) you need the cash to be.
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finance a la shmoop. what is a money market fund? isn't it a strange concept
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well yeah it's strange but the practice exists and it's a huge multi trillion
dollar market today. the key word here is money and not investment. why such a big
diff? well because the notion of investing implies duration. that is when
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like years maybe decades maybe centuries if you can find the right miracle pill.
but here we're talking about money like the stuff you can buy candy with. so it's
short term not long and a money market fund basically comprises many series of
pretty safe bonds that are all coming due in the next 30 to 90 days. sometimes [pie chart]
longer than that sometimes shorter but generally in the very near future. so why
would you care about a money market fund? well because it pays you slightly more
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corporations need cash just sitting around to pay their bills, so there are
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market fund. we're sure you'll have plenty of experience with them by the
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