- Savings – This is a deposit account that earns interest known as an annual percentage rate or APR.
- Checking – These accounts allow you to deposit money, withdraw money, and write checks to pay for purchases and bills. Most banks will also provide a debit or ATM card and a checkbook to allow you to withdraw cash, transfer funds between accounts, and make deposits at your bank’s ATM machines.
- Certificate of deposit (CD) – This is a deposit-only account that offers a guaranteed interest rate for a specified term usually ranging from 6 months to 5 years–if you promise not to touch the money for the agreed upon term. Most banks charge a penalty for early withdrawal.
- Money market – These are deposit accounts that pay interest. Money market accounts provide a higher interest rate than traditional savings accounts and usually come with high minimum balance requirements.
Each has different rules and benefits that fit different needs. The bank or credit union must provide you with the account terms and conditions when you open your account.
When choosing an account that is right for you, think about these factors:
- Minimum deposit requirements – Do you have to keep a minimum dollar amount in your account to earn interest or avoid account maintenance fees?
- Limits on withdrawals – Can you take money out whenever you want? Are there any penalties for doing so?
- Interest – Can you earn interest on your accounts? How frequently is it paid (monthly, quarterly)? Check with banks or credit unions to compare their current published rates.
- Online bill pay – Can you pay your bills directly from your bank or credit union’s website?
- Deposit insurance – Make sure that the bank is a member of the Federal Deposit Insurance Corporation (FDIC) or that a credit union is insured by the National Credit Union Share Insurance Fund (NCUSIF).
- Mobile banking – Can you access your accounts and make deposits from your mobile phone or tablet? Does the bank charge fees for this access?
- Convenience – Are there branches or ATMs close to where you work and live? Can you bank by phone or Internet?
If you are considering a checking account or another type of account with check-writing privileges, add these items to your list of things to think about:
- Number of checks – Is there a maximum number of checks you can write per month without incurring a charge?
- Check fees – Is there a monthly fee for the account or a charge for each check you write?
- Holds on checks – Is there a waiting period for checks to clear before you can withdraw money from your account?
- Overdraft protection – Many banks and credit unions offer overdraft protection, but you must opt-in to get the service. This prevents you from cashing a check, withdrawing money, or using your debit card for an amount greater than the amount of money in your checking account. Banks can’t impose overdraft fees if you haven’t opted in.
- Debit card fees – Are there fees for using your debit card?
- Account fees – Does the bank charge fees on your checking or savings accounts to cover things like maintenance, withdrawals, or minimum balance rules?