i. Money Market Account:
Before online banking became rampant, the money market account characteristically offered superlative revenues for liquid bank accounts. These were usually tiered-rate accounts that delivered the best returns for huge balances. A nominal service fee every month was also levied unless you stuck to a minimum balance amount.
With virtual banks, there is no longer much discrepancy between savings accounts and money market accounts. Some savings accounts have no minimum balance prerequisites and certainly no monthly maintenance charges. Some savings accounts also provide you with a debit cum ATM card while some don’t. Also do your homework on the best interest rates available. You may need to show a better balance to get better rates though there are lenders that offer the same for smaller balances as well.
ii. Checking Accounts:
Before, a normal checking account would not even be thought of as an option. It was always expected that a savings account or a money market account can fetch you the optimum interest earnings.
In the past couple of years, this notion has changed drastically. There have been a few lenders and credit unions that have presented highest rate on their checking accounts. But one must also note that these range of checking accounts slightly vary from conventional checking account. For instance, some banks insist on making deposits every month. And some do not allow online payment but insist on paper cheques as well as levy fine for accounts that dip below the specified balance.
iii. Savings Account:
Saving accounts are accounts sustained by banks and other financiers that pay out interest but shall be utilized directly as cash in the slight sense of the exchange medium, like giving a cheque. These accounts allow clients to keep aside a part of their income or other assets while gaining a steady return. For the concerned bank, resources in savings accounts might not be callable instantly and, in some dominions, does not even sustain a standby obligation. They are generally used to give out as loans.
A classic savings account is customized to be simple and user-friendly. There are lots of options with no minimum balance amount specifications or service charges per month. Interest rates are too pretty straightforward but vary by taking various parameters like age, gender, income and location into consideration. There is just one interest rate that's good for all balances. The only way you can deposit and withdraw funds is to link the account to an outside liquid account. Then you can initiate ACH bank-to-bank transfers. There's no ATM card and no check writing. Banks at times opt to cut down deposit growth by bringing down rates.
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FAQs
Cash is the most liquid asset possible as it is already in the form of money. This includes physical cash, savings account balances, and checking account balances.
What type of account is most liquid? ›
Answer and Explanation: Checking accounts is the most liquid as you can withdraw money whenever an account holder wants. There is no limitation on money taken out of the account.
Which account is generally the most liquid? ›
Liquidity in finance by the book is how quickly any asset can be changed in to hard cash. Therefore, any account having only cash can be said as the most liquid. For instance, a checking or a saving account could be considered the most liquid accounts.
Which type of deposit is most liquid? ›
2. Cash. Cash is the most liquid of all assets. It can be used to make purchases, investments, or pay off debts instantly.
Is accounts receivable the most liquid? ›
Answer and Explanation: Account Receivable is considered the most liquid because it owes money to the company and it can either be in the form of cash or can easily be converted into cash. A liquid asset is called a quick asset which will not lose any value in the process.
Which asset is most liquid? ›
Cash is the most liquid asset, followed by cash equivalents, which are things like money market accounts, certificates of deposit (CDs), or time deposits. Marketable securities, such as stocks and bonds listed on exchanges, are often very liquid and can be sold quickly via a broker.
What is a highly liquid account? ›
The most liquid assets are cash and accounts known as "cash equivalents," like savings, checking and money market accounts. Even certificates of deposit (CDs) and I bonds could be considered liquid, slightly less liquid than a checking or savings account, but fairly easily accessible.
What is the least liquid account? ›
Certificate of deposit is the least liquid type of account (CD). In a certificate of deposit, a bank customer deposits a lump-sum payment in the account, which can then be withdrawn after a set period of time. The interest rate on a CD is higher than on a regular savings account.
What is highly liquid in accounting? ›
In financial markets, liquidity refers to how quickly an investment can be sold without negatively impacting its price. The more liquid an investment is, the more quickly it can be sold (and vice versa), and the easier it is to sell it for fair value or current market value.
Is cash the most liquid of assets? ›
And cash is generally considered the most liquid asset. Cash in a bank account or credit union account can be accessed quickly and easily, via a bank transfer or an ATM withdrawal. Liquidity is important because owning liquid assets allows you to pay for basic living expenses and handle emergencies when they arise.
These liquid assets are cash, marketable securities, and accounts receivable. Among the choices, the one that should be considered as the most liquid asset is cash itself.
What is a liquid bank account? ›
Liquid bank accounts, including liquid savings accounts, are any account that allows you easy access to the money in the account. The term “liquid” means that you can easily withdraw the cash in the account, as opposed to many other bank assets which are not liquid (such as real estate).
What is liquidity in accounting? ›
Liquidity, or accounting liquidity, is a term that refers to the ease with which you can convert an asset to cash, without affecting its market value. In other words, it's a measure of the ability of debtors to pay their debts when they become due.
Which type of account is typically the most liquid? ›
The most liquid type of account is a checking account, while the least liquid type of account is a certificate of deposit.
Which account is more liquid? ›
Cash and Cash Equivalents
Cash is the most liquid asset possible as it is already in the form of money. This includes physical cash, savings account balances, and checking account balances.
Which one of the following accounts is generally the most liquid? ›
We know that the most liquid asset is cash because it is readily available and can be easily used for payments.
What account has the highest liquidity? ›
Liquid assets examples: Accounts in order of liquidity
| Account Type | Level of Liquidity | Average Rate of Return |
|---|
| Checking account | Highest | 0.140% APY |
| Savings account | Decent | 0.201% APY |
| Money market account | Decent | 0.237% APY |
| Certificate of deposit | Low | 0.254% APY on a 3-month CD 0.649% APY on a 1-year CD 1.130% APY on a 5-year CD |
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Certain account types are more liquid than others: Checking accounts. Checking accounts are the closest to cash, in terms of liquidity. You can pay for things directly with a debit card, write a check or withdraw cash.
What account is the least liquid? ›
Certificate of deposit is the least liquid type of account (CD). In a certificate of deposit, a bank customer deposits a lump-sum payment in the account, which can then be withdrawn after a set period of time. The interest rate on a CD is higher than on a regular savings account.
