Learn the 4 Most Common Types of Bank Accounts

Savings Account Features to Look for

• No monthly maintenance cost

• Online account access, including transfers from your checking account

• A competitive interest rate (it won’t be much, but it’s better than nothing!)

What to Look for in a Savings Account

• Interest earned is taxable income;

• Some banks may require you to maintain a minimum balance; and

• There may be monthly limits on the number of transactions and withdrawals you can make.

3. Money Market Deposit Account

Assume a checking account and a savings account had a child. A money market account would be this beautiful little money baby. A money market account, like a checking account, may feature a debit card. However, some banks do not.

A money market account, like a savings account, earns interest (not much, but usually slightly more than a savings account) while keeping your money separate from your daily funds. This sort of bank account is a wonderful place to keep your 3- to a 6-month emergency fund, keeping it close at hand but separate from your regular checking account.

Money Market Account Features to Look For

• Frequently earns more interest than a traditional savings account.

What to Look for in a Money Market Account 

• There may be monthly limits on the number of transfers and withdrawals you can make.

• A minimum balance may be required to start and maintain the account to avoid costs.

• Interest earned is low yet taxed.

4. Certificate of Deposit (CD)

No, a CD is not a relic of compact discs. A CD stands for a certificate of deposit. It’s similar to a savings account, but one where you won’t earn much and could lose considerably more.

Yikes! So it’s more like a depression certificate—not a place to store your money. CDs now have an average rate of return of around 1%. And, given that inflation averages roughly 3% each year, you could lose money. Nope.

Thank you, but no. There are several CD term lengths, or “maturity dates,” and if you remove your cash before that date, you may be penalized. CDs are classified as short-term (less than 12 months), mid-term (1-3 years), and long-term (4-5 years). With a CD, you’re essentially lending your money to the bank, and they “reward” you with a small amount of earned interest. The longer you lend them money, the greater the interest rate.

But remember that a “higher” interest rate is usually no more than 1-2%. Your bank would love nothing more than for you to lose patience and cash out a short-term or long-term CD early, allowing them to profit from the early withdrawal penalties.