The different types of bank accounts (2024)

Bank accounts are essential tools for making financial transactions, but different types of bank accounts can serve different purposes. Whether you need to make everyday transactions or maximize interest earnings, there’s a bank account that meets your needs.

Checking accounts can offer convenience and an easy way to keep your cash safe yet accessible, while savings accounts can earn interest on the money you want to keep close but separate from the money you use for everyday expenses.

Money market accounts provide a way to earn interest on limited-transaction accounts, and with certificates of deposit (CDs), you can earn fixed interest, but your funds are locked up for a certain amount of time.

An introduction to bank accounts

Bank accounts are deposit accounts that allow you to deposit funds, withdraw money and make transactions such as debit card purchases and transfers. Whether you need a bank account for everyday spending or want to maximize interest earning, different types of bank accounts can be a vehicle for achieving your financial goals.

Different types of bank accounts

The most common types of bank accounts include:

• Checking accounts
• Savings accounts
• Money market accounts
• CD accounts

Checking accounts

Checking accounts are designed for frequent transactions and easy access to your cash. You can generally make deposits into your account via direct deposit, at a branch, online, via ATM or in a mobile app. For withdrawals, you’ll typically get a debit card and checks that you can use to make purchases and you can make bill payments and transfers.

Specialized types of checking accounts include interest checking, student checking, kid or teen checking, senior checking and rewards checking.

Savings accounts

With a savings account, your cash is still accessible but these accounts aren’t intended for frequent transactions. Banks may restrict the number of withdrawals or transfers you can make with your savings account each month. Savings accounts typically pay interest on your deposits, so there’s an incentive to park your cash, whether short or long term. Emergency funds or goal-based savings are good choices for savings accounts.

Types of savings accounts include traditional savings, high-yield savings and youth or student savings. You can also open retirement savings, such as an IRA, and health or college savings such as an FSA, HSA or 529.

Money market accounts

Money market accounts have features similar to checking and savings accounts. You’ll earn interest on your deposits but can get fairly easy access to your cash. You may get checks or a debit card to use with a money market account, though your monthly withdrawals may be limited, similar to a savings account. Money market accounts tend to earn a higher interest rate than savings accounts but might require you to maintain a minimum balance to avoid fees.

Certificate of deposit (CD) accounts

CDs are deposit accounts with maturity dates. When you open a CD, you’ll select the term and the corresponding interest rate you’ll earn on your balance. If you leave your money in the CD until maturity, you’ll earn the full interest amount. At maturity, you can withdraw your deposit plus earned interest or roll it into a new CD. If you withdraw funds early, you’ll generally face an early withdrawal penalty that’s usually a portion of the interest earned.

Matching your bank account to your financial needs

The type of bank account you should open depends on your financial goals and needs. It’s common for people to hold multiple bank accounts, such as checking, savings and CDs.

Checking accounts are for your everyday transactions. They are for depositing your income and then making purchases and paying bills.

Savings accounts are a good choice for money you want to keep accessible but don’t want to spend like you would with a checking account. This account is for your emergency fund or money set aside for a large purchase you are saving up for.

Money market accounts work well for savings that have a specific purpose that will have a series of expenses over time, for example, remodeling your kitchen. These accounts often come with checks but have transaction limits. They can also be used as traditional savings accounts since they typically pay a competitive interest rate.

CDs can be helpful if you want to earn a fixed interest rate and don’t anticipate you’ll need to access your deposits until the maturity date.

“Checking and savings accounts are the two most popular banking accounts. A checking account provides the convenience of conducting daily monetary transactions, such as receiving a direct deposit, paying bills and making purchases with a debit card,” said money coach and certified financial planner Ohan Kayikchyan. “Savings accounts, on the other hand, are designed for saving money and earning interest on the funds within, but are not convenient for daily activities, as they have certain restrictions on money movements.”

What you’ll need to open a bank or credit union account

You’ll need personal information and, sometimes, a minimum deposit to open a new bank account. Be ready with the following when you want to open your bank account:

• Personal information, including your name, birthdate and Social Security number. You may need to share your citizenship status and show identification.
• Contact information, including your address, phone number and email.
• Your initial deposit, which may need to meet minimum deposit requirements.

Finding the bank account that works best for you

When you choose a bank account, consider the fees, interest rates, accessibility and features.

Fees: Bank accounts typically have fees, such as a monthly maintenance fee. Sometimes, you can waive the fee by meeting certain criteria, such as maintaining a minimum balance, making a direct deposit or making debit transactions. Understand which fees you’re most likely to pay and how much it will cost you — and whether a different account could be less costly.

Interest rate: Interest rates can also affect the bottom line of your bank account. An account that earns a higher APY can earn more interest, but you should weigh the value of interest earnings against fees, features and other bank account details.

Accessibility: Access to your deposits varies depending on the account you choose. Checking accounts typically offer unlimited access, but you may be limited on withdrawals with a savings or money market account. CDs often don’t allow early withdrawals without penalty, though no-penalty CDs are available.

“Accessibility to money is very important, which translates to the available ATM network and locations,” said Kayikchyan. “Many banks offer a modern way to deposit checks with a mobile application, although certain restrictions and limitations apply depending on the type of the account and the balances held in it.”

Features: Features can seal the deal on a bank account. You might find value in a debit card that earns cash back or a savings account that divides your balance into buckets for savings goals. Ease of use makes a difference, too, such as a mobile app that makes it easy to deposit checks and make online bill payments.