Coming from a long line of bankers, Julio M. Herrera Velutini is the chairman of an international bank based in Puerto Rico. In his position, Julio Herrera Velutini provides banking services to clients in both North and South America. Banks offer clients several different types of accounts today. For people looking to grow their savings, two types of bank accounts pay interest on deposits: savings accounts and money market deposit accounts (MMDAs). Both are insured by the Federal Deposit Insurance Corporation, but have unique advantages and disadvantages. Here’s a breakdown of each: i) Savings accounts These accounts are designed for liquidity. Users can access their money easily and make deposits and withdrawals. Money in savings accounts earns interest but at a small rate and many banks charge fees when money in a savings account falls below a minimum balance. The accounts do not have check-writing privileges and are suitable for holding emergency funds or for use as overdraft protection. ii) MMDAs These accounts direct deposits to investments such as treasury bills, commercial paper, and certificates of deposits. Banks pay interest on MMDA deposits, usually at a higher rate than savings account deposits, and this interest is only earned if a person’s account balance is above a high minimum amount. MMDAs have limited liquidity in that owners are allowed to write up to a certain number of checks a month, say three, and withdrawals can take days to complete. These accounts are suitable for long-term interest-earning savings such as for a child's college tuition.
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AuthorMr. Velutini has experience with both established banks and young banks. S Archives
December 2017
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