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Types of bank accounts

People walking past an HSBC Bank
ANDREW CABALLERO-REYNOLDS/Getty Images
People walking past an HSBC Bank
ANDREW CABALLERO-REYNOLDS/Getty Images
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Bank accounts are useful tools that can help you manage your finances. The varied types of accounts allow you to save and keep track of spending, and some will even earn you more money in the form of interest.

If you’re interested in opening a bank account, you must decide among several different kinds and familiarize yourself with the rules for each. By being informed, you can determine which accounts best meet your lifestyle and goals. Most banks offer four types of accounts:

Account Type Why you may want it
Checking You want access to your money at any time and are OK with earning minimal to no interest.
Savings You don’t need access to your money often and would like to leave it in a secure account that earns some interest.
Money market You want a mix between a checking and savings account and only need occasional access to your money.
Certificate of deposit You want to invest money that doesn’t need to be accessed for a specified amount of time and earn a fixed rate.

Checking accounts

A checking account provides easy access to your money for daily spending. Checking accounts are the most accessible type of bank account, since they allow you to deposit and withdraw money with few or no limits. Though checking accounts don’t traditionally earn any interest, some banks and credit unions do offer interest-bearing checking accounts. Checking accounts typically come with a debit card, which you can use to make purchases or withdraw cash from ATMs.

Some checking accounts charge fees for maintenance, ATM withdrawals and minimum balance violations. Comparing options can help you find a checking account with the lowest fees and best terms for you, such as whether an account refunds ATM fees, should you frequently need to withdraw cash.

Good for:

  • Everyday spending and bill payments.
  • Frequent deposits, such as paychecks.

Bad for:

  • Consumers who want to earn interest on their money.
  • Spending more than what you have immediately available, since it may incur overdraft fees.

Savings accounts

A savings account is a good place to park money that’s not to be spent immediately. Savings accounts earn interest on the funds you deposit, and they can help you build up an emergency fund or work toward a savings goal, like a down payment on a house. Unlike checking accounts, savings accounts may impose restrictions on how many withdrawals or transfers you can make each month, typically six maximum. Most also don’t come with checks or a debit card.

Savings accounts vary in interest rates, method of compounding interest, service fees and minimum opening deposits. Compare options with Bankrate’s best savings accounts.

Good for:

  • Emergency funds.
  • Saving for a goal, like a down payment on a house or a car or a vacation.
  • Consumers who are looking to curb spending by tucking some of their money away.

Bad for:

  • Frequent and/or easy access to money.
  • Making transactions or paying bills.

Money market accounts

At its core, a money market account (or MMA) is a combination of a checking and savings account. Money market accounts tend to have a higher interest rate than savings accounts, but they may also have a higher minimum balance requirement. Some money market accounts come with checks or debit cards, but the number of monthly withdrawals from the account is usually limited just like a savings account.

Good for:

  • Consumers looking to maintain a high account balance and earn interest on it.

Bad for:

  • Unlimited access to money.
  • Those who can’t meet the minimum balance requirements.

CDs

Certificates of deposit (CDs) allow you to invest money for a specified period at a fixed interest rate with minimal risk. Terms range from a few months to several years. CDs typically pay higher annual percentage yields (APYs) than other bank accounts, in exchange for a commitment to keep the money in the account for the entire term. Taking money out before the term ends can result in a lofty early withdrawal penalty, though some banks offer no-penalty CDs that forego early withdrawal fees in exchange for lower interest rates.

Good for:

  • Storing money away to save for a future goal.
  • Those who want to earn more interest in exchange for locking up their funds for a while.

Bad for:

  • Accessing funds without an early withdrawal penalty.
  • Those who can’t afford to lock up the minimum balance requirement for a while.

Bottom line

Remember that you can open more than one bank account to meet your various financial needs and goals. Many banks offer several types of bank accounts, so you can do all your banking with one institution, though finding the best deal may require opening accounts at separate financial institutions.

–Anna Baluch contributed to an earlier version of this article.

Written by
René Bennett
Banking writer
René Bennett is a writer for Bankrate, reporting on banking products and personal finance.
Edited by
Wealth editor