Effective Jan. 1, 1981, savings institutions in this area will be authorized to pay interest on checking accounts. This is part of a nationwide expansion of the popular NOW accounts that have been available in several New England states for some years.

NOW is the acronym for Negotiated Order of Withdrawal -- a fancy name for a check drawn against a savings account.

Competition for your account is expected to be quite fierce, and in fact already has started. The new service probably will be marketed aggressively and under as many different names as merchandising experts can come up with.

The basic concept, of course, will be the same in all cases. But there are going to be differences that could turn out to be important to the individual customer.

These differences may occur in such areas as minimum required balance, interest rate and compounding frequency, charge (or no charge) for check printing, return or retention of canceled checks and possible collateral services.

Keep in mind that banking is a business; the product if financial services. As with any other product, there are competitive differences in the price you pay.

You should shop around and compare price and service before you buy. And don't just look at ad headlines -- read the fine print, ask questions and know just what you're getting before you buy.

Question: I have some cash I want to invest in a mutual fund. A friend said she thought closed-end funds are a good deal now; but I never heard of them before. What are they ?

Answer: A closed-end investment trust is similar in many ways to the open-end trusts that are commonly referred to as mutual funds.

Both types of companies maintain managed portfolios of stocks, bonds, or other types of investments. A share in either one represents a fractional ownership of the total portfolio.

In both cases income from the investments (interest and dividends) is distributed periodically to the shareholders. In addition, the managers hope to generate (and distribute) capital gains on the purchase and sale of portfolio holdings. And both have techniques for automatic reinvestment of dividends.

The difference between the two is in the marketing concept. An open-end fund has a practically unlimited number of shares available.

You buy shares in an open-end fund from the managers, either directly or through an agent or broker. The cost per share is the net asset value -- total assets minus liabilities divided by the number of shares outstanding.

In the case of a "load" fund, you pay an additional charge (the sales fee), which may range from as little as 2 percent to as much as 9 percent.

To sell open-end shares, you simply request redemption from the sponsors (and send them the share certificate if you have one). The shares are bought back from you at the net asset value on the day of redemption, usually without extra charge.

A close-end trust, on the other hand, issues a specific and limited number of shares. After the initial issue, you buy shares on the market through a broker.

The price you pay may be more or less than the net asset value, depending on market conditions -- just like any other stock. The probable reason your friend considers them a good deal is that many good closed-end trusts are not selling at a discount -- that is, at a price lower than the next asset value. So you have more capital working for you than you have invested.

But selling works the same way. That is, you sell the shares (again through a broker) at the market price. And that market price may still be less than the net asset value.

In other words, investment in a closed-end trust is much like investing in any other corporate stock. Buy and sell prices depend on market fluctuations in that particular stock -- fluctuations that may not be directly responsive to changing values in the underlying portfolio.

Buy and sell prices for shares of an open-end fund, on the other hand, are the current net asset values. Thus they are tied directly to market fluctuations in the entire portfolio held by the fund.

I prefer the open-end fund for an unsophisticated investor because it entails a little less risk. You have the protection of a diversified portfolio directly affecting the net asset value and thus the share price.