Deposit, Checking Account or Money Market Fund?
A deposit is an agreement with the bank to place money under specified interest and for a set period.
A checking account is used for regular payments. With a deposit you check the interest rate, the period and exit points. With a money market fund you check the policy, costs and redemption terms; the return is not predetermined as a guarantee. Choosing requires understanding the goal and the terms, not just comparing a single number.
An offer for one year and an offer for one month are not the same even if both show the same annual interest rate.
Compare the three options by availability, certainty of return, and costs.
Bank of Israel · Savings and Investment Products ↗Check your understanding
What do you check for a deposit?
- Interest rate, period and exit options
- Only the logo color
- Only how many friends opened one
Answer and explanation
Interest rate, period and exit options. The agreement determines what will happen to the money and the interest.
Does an annual interest rate of 4% for one month give 4% that month?
- Yes
- No
- Always more
Answer and explanation
No. Annual is a rate for a year. For a month the result is different and depends on the calculation terms.
Continue learning
Money Market Fund: Close to Cash, But Different — A money market fund is a mutual fund that invests in short-term assets with relatively low risk.
Inflation and Purchasing Power — Inflation is a rise in the general price level over time.