When it comes to business accounts, a payment account can have its checks or drafts written against it. A non-payment account can only receive money but doesn't write checks.
Bank accounts serve different functions, such as savings, expenses, investments, or payments. For example, if you have a non-payment account, the bank will not allow you to deposit more than the allotted balance each day. Payment accounts do not have this restriction and allow for deposits at any time.
What is a "non-payment account"?
Accounts that do not handle frequent transactions are called non-payment accounts. They are commonly called "non-transaction" accounts because accounts can only use them for specific and limited purposed.
Non-payment account 101: Non-payment/Non-transaction accounts limit the withdrawal period and when transfers can occur.
There are consequences associated with transactions that occur on an account that is not open for at least a specified period. It can include paying bank fees or losing interest.
Non-payment accounts come in three types.
There are a few different types of non-payment accounts.
- Fixed-term accounts
- Investment accounts for retirement
- Savings account
Fixed-term accounts
A fixed-term account means you cannot withdraw your investments until the end of your specified period or fixed term (60, 90, 180, 365 days).
A bank account can't use the money in a term account for anything other than the account's name. For example, Term deposits and bonds are long-term investments that you can only withdraw at a specific period.
Investment accounts for retirement
Retirement accounts are designed for those who need to save money for the future. Millions of people use them because they can help you save more money.
These accounts are not meant for everyday transactions but are geared toward retirement savings.
IRAs are one type of retirement account.
IRAs are retirement savings typically penalized for taking money out before retirement age.
If you withdraw money before 59½, you will have to pay a 10% penalty fee. A bank account can avoid it by leaving the money in your account until 59½.
The Internal Revenue Service (IRS) demands a 10% withdrawal penalty on people who withdraw from their retirement accounts (IRAs) before turning 59-1/2.
Savings account
Savings accounts can grow your money while it sits and invests. One great thing that a savings account offers is withdrawal limits. It helps you build up your savings and plan for the future as an investment or a personal expense.
Saving on savings accounts means you have more money to use later, like right now. You can build up funds for occasional expenditures such as an emergency fund or saving up for a house. Or you can save up for the fun stuff without spending that money.
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