4 Other popular bank accounts Savings accounts – It used to be that most people kept their money in savings accounts that generated interest of 3%, 5%, or more. But with today's low interest rates, many people just keep their money in a checking account, or they invest their money in mutual funds, stocks, and/or bonds. Certificate of Deposit (CD) – Sold by banks, certificates of deposit pay a slightly higher interest rate than a traditional savings account. When you purchase a CD, you agree to keep your money in the bank for a specific period of time (usually one month to five years). At the end of the term, your money is returned to you with inter- est. If you want to withdraw your money early, you pay a hefty fee. Banking is big business. Banks are in business to make money, which they do in part by charging their customers fees on their accounts, and interest on their loans. u Bank fees These are just a few examples of the many fees banks charge: u ATM fees u Minimum balance fees u Overdraft fees u Lost debit card fees Financially literate customers do everything they can to avoid or minimize bank fees. u Loans Banks use their customers’ money to issue loans—loans to individuals (e.g., college loans, car loans, real estate loans) and loans to companies (business loans). Banks, of course, make a profit from the interest on these loans. Here’s something you should understand about interest... You pay interest when you take out a loan, and you receive interest when you have an “interest-bearing account,” such as a savings account. But here’s the thing—the interest you are charged on the loans you take out (e.g., college or auto loan) is always higher than the interest you receive on your interest-bearing accounts (e.g., savings accounts). That's how banks make a profit.