4 Must-Know Types of Bank Accounts in 2023

Money market accounts strike a balance between checking and savings accounts. They offer higher interest rates than traditional savings accounts while still allowing you to access your funds relatively easily. Money market accounts are suitable for short-term savings and emergency funds. However, they may have higher minimum balance requirements and limited check writing and transaction capabilities.

However, if you need more flexibility in your savings or are looking for higher returns, you may want to explore other investment options, like mutual funds or stocks. Money market accounts typically require a higher minimum balance than a regular savings account but offer higher interest rates in exchange. Think about the purpose of the account and what features you need. If you’re saving for something and want to keep the money separate from your other accounts, look for a savings account that allows you to create and label sub-accounts.

Money market deposit account

A bank might also offer a higher rate to accounts with deposits above a certain threshold and a lower rate to accounts with a balance below that threshold. Also, keep the minimum deposit and minimum balance requirements in mind. While you don’t necessarily need several thousand dollars to open a money market account, you may need it to earn the best APY with some accounts. That’s because banks may tier money market account interest rates, paying you a higher APY for a higher balance. Choosing a money market account is similar to choosing a checking account, in terms of fees or features. If you want a debit card or check-writing privileges, be sure to check whether a particular money market account offers those features, as not all of them do.

While separating your money based on the goals you’re trying to reach makes sense, things can get too complex. If you work with a financial institution that charges fees for each account, you might end up paying more than necessary to keep several open. A better option might be to consolidate accounts or to work with a bank that offers free accounts.

This type of bank account is a good place to store your 3- to 6-month emergency fund so that it’s close if you need it but out of your everyday checking account. While others may penalize you if you take money out at the wrong time. Basic checking and savings accounts are a great starting place for everybody. And then from there, you can branch out into different types of bank accounts where your money can really start to add up. Business checking accounts are the most common type of business account. They allow businesses to manage their day-to-day financial transactions, such as receiving payments from customers, making vendor payments, and handling payroll.

Business loans and lines of credit

You will need to pay income taxes on withdrawals you make after age 59.5 as well, but your money should have grown significantly. At the maturity date, you can withdraw your funds without incurring a penalty. Withdraw your money before that date and you may have to pay a penalty in the form of a number of months’ worth of interest. A foreign currency account, sometimes also known as a multi-currency or borderless account, is ideal for importers and exporters who pay or receive funds in another currency. It lets you send and receive funds in multiple foreign currencies and can be maintained by an onshore or offshore bank. You can open multiple types of bank accounts based on your requirement.

You can use a debit card to spend money from the account or write checks. Even if you rely on a credit card for most of your spending, you might want to have a checking account to pay off your card balance at the end of the month. A certificate of deposit (CD) is a savings account that provides guaranteed returns over a fixed period of time, usually between three months and five years. During that time, your funds are locked away, and you can’t access the money until the maturity date.

A debit card and checkbook are usually issued and transactions can be easily managed through online banking or a mobile banking app. Part of the foundation to your personal finances may be creating a regular savings habit. There are many types of savings and deposit accounts to choose from that may help you reach your financial goals. These can include traditional savings, certificates of deposit, high yield and student savings accounts. Some offer higher returns, others more flexibility in accessing your money, or unique features.

Types of savings accounts

These accounts are managed on behalf of the minor until they reach the age of majority, which varies depending on the jurisdiction. Custodial accounts can be used to save and invest money for the child’s future education or other financial needs. Some individuals employ a CD laddering strategy, where they open multiple CDs with different maturity dates. This approach helps distribute funds across various CDs, ensuring liquidity at regular intervals while taking advantage of potentially higher interest rates on longer-term CDs.

• Trust accounts are established for managing and safeguarding assets on behalf of a beneficiary or beneficiaries.
• If you struggle with budgeting, for example, then a chequing account that comes with free budgeting tools might be a good choice.
• See your issuing bank’s Deposit Account Agreement for full Chime Checkbook details.
• Redeemable GICs allow you to withdraw your money without paying a penalty at any time, but you will receive a lower APY up to the time of withdrawal.
• Compared to a regular savings account, MMAs usually have higher interest rates, which means your money has more opportunity for growth.
• Opening a savings account also marks the beginning of your relationship with a financial institution.

Your employer might offer direct deposit, which electronically transfers your salary to the account using the bank’s routing number and the account number. You can also deposit money using paper checks or cash, or by electronic transfers. Daphne Foreman is a former Banking and Personal Finance Analyst for Forbes Advisor. She has worked as a personal finance editor, writer, and content strategist covering banking, credit cards, insurance and investing. As a small business owner and former financial advisor, Daphne has first-hand experience with the challenges individuals face in making smart financial choices.

If you want to open a savings account to set aside money for short- or long-term goals, consider which type of savings account may be best. Standard or basic savings accounts from traditional banks can earn interest, though you’re more likely to pay a monthly fee if you’re opening one of these accounts at a traditional bank. The right type of bank account for you will depend on what you need to do with your money. From saving money with a savings account to needing access to liquidity with a checking or money market account, there are plenty of options for your needs. No matter what type of bank account you choose, look for an FDIC-insured bank and an account with as few fees as possible. Unlike a savings account, your money won’t earn much interest in a checking account.

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They offer limited check-writing privileges and collect interest at higher rates than savings or checking accounts, making them useful for short- or long-term needs. Business accounts are specialized bank accounts designed specifically for the financial needs of businesses, whether they are sole proprietorships, partnerships, or corporations. These accounts help separate personal and business finances, streamline banking transactions, and provide access to various banking services tailored to business requirements. CD accounts are suitable for individuals who have a specific time horizon for their savings and do not require immediate access to their funds. They are particularly useful for individuals looking for a low-risk investment option with guaranteed returns. CDs can be used to save for short-term goals, such as a down payment on a house or a planned vacation, as well as for longer-term objectives like retirement planning.

These accounts cater to unique situations and offer specialized features and benefits. Many banks offer business loans and lines of credit to help businesses finance their operations, expansions, equipment purchases, or other specific business needs. These financing options can provide access to capital to support growth, manage cash flow, or handle unexpected expenses.

For example, you might use a checking account when you set up automatic bill payments or write personal checks. If you have a debit card, the money typically gets withdrawn from a checking account every time you make a purchase. Bank accounts are convenient and secure places to keep your money safe and allow you to withdraw funds when needed. There are various types of bank accounts that each serve a different purpose, such as saving for emergencies or for specific goals, earning interest or accessing money to pay bills.

Fit Your Bank Accounts to Your Needs

The biggest benefit to a savings account is that you can earn interest and grow your money without doing anything. The interest rate is called the annual percentage yield (APY), and it varies based on market conditions. They usually require that you maintain a minimum daily balance and they offer higher interest rates for customers who maintain that balance. Business savings accounts are Types of bank accounts similar to personal savings accounts, but they are used to save business earnings for future business use. Funds deposited in a business savings account can earn interest while the funds still remain easily accessible when needed. While a savings account is intended as a place to save money, withdrawals are typically easy to do, so your money remains accessible when you need it.

Or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. When opening a bank account, it’s just as important to choose the right bank or financial institution as it is to choose the right type(s) of accounts. Opening a bank account is essential for storing and managing your money safely.

CDs have a fixed term or maturity period, which can range from a few months to several years. During this period, you cannot withdraw the funds without incurring an early withdrawal penalty, except in certain cases, such as the death of the account holder. Checking accounts are essential for managing your everyday expenses and providing easy access to your money. They provide a safe and convenient way to handle your finances while offering various features and benefits to suit your individual banking needs.

Business checking accounts

You might open a money market account if you want to earn interest on money you don’t plan to spend yet, while making it convenient to eventually do so with a debit card or check. For example, you might set up a money market account to hold your down payment savings if you’re prepping to buy a home. Money market accounts may have higher initial deposit limits to open and higher minimum balance requirements to maintain. A money market account, for example, may require $1,000 or more to open, while a savings account may require no minimum deposit. An online bank, on the other hand, may charge fewer fees and offer higher rates for savers.

The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials. Some accounts are categorized by the function rather than nature of the balance they hold, such as savings account, which routinely are in credit.