4 Other popular bank accounts u Savings account– It used to be that most people kept their money in a savings account that generated interest of 3%, 5%, or more. But with today's low interest rates, many people keep their “spending money” in a checking account, and invest any additional money in CDs, mutual funds, stocks, and/or bonds. u Certificate of Deposit (CD)– Sold by banks, CDs 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 interest. If you want to withdraw your money early, there’s a hefty penalty. Banking is big business Banks are in business to make money. They do this, 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 make loans—loans to individuals (e.g., college loans, car loans, real estate loans) and loans to companies (business loans). Banks make substantial profits from the interest on these loans. Here’s something to 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 ac- count or CD. But here’s the thing—the interest you’re 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., CDs, savings accounts). This is how banks make a profit.