Bank Account Guide: Understanding Different Accounts
Updated: Aug 8
Where you put your money matters. In order to plan for a fruitful financial future, it's important to know the key differences between various accounts. We compiled this guide to help you gain an understanding of the common account types, and determine which accounts are appropriate for you. With this knowledge, you’ll be able to make an educated decision when storing or investing your money.
A checking account is a deposit account that is geared toward daily transactions. Checking accounts allow you to make withdraws and deposits with ease. They usually pay very little interest. Checking accounts often have fees associated with them, including overdraft fees and minimum deposit fees. This type of account is useful for keeping your funds accessible to make everyday purchases. If you need a credit card for online purchases, this online resource could help you get approved, regardless of credit history.
A savings account is a deposit account that pays you a small interest rate on your savings. Unlike a checking account, a savings account typically limits the number of withdrawals you can make in a given time period. Savings accounts are useful for saving for a purchase or building an emergency fund for a rainy day. Although interest rates are usually on the lower end, savings accounts offer a low-risk solution for parking your money. They also tend to have lower minimum deposit requirements when compared to checking accounts.
Money Market Account
Like a savings account, a money market account typically limits the number of withdraws you can make per month. However, these accounts incur more interest than a standard savings account. This type of account usually requires a minimum deposit of $1000 or more. Money market accounts are favorable for individuals who want a higher APY. The downside is that you will have a higher minimum balance to maintain.
Certificate of Deposit (CD)
A certificate of deposit is a time deposit account that requires you to refrain from withdrawing your savings for a set time period. The longer the time period, the higher your interest rate will be. Once the time period is up, you can withdraw your initial investment along with the interest incurred. Alternatively, some banks allow you to roll over your returns into a new CD. Certificates of deposit are beneficial if you have funds that can be set aside for a while. Keep in mind that withdrawing your money before your investment matures will likely result in a hefty fee.