The types of bank accounts that most banks offer go beyond just a standard checking and savings account. If you’re not sure what the different types of, don’t worry! We’ll break down the different types of bank accounts that are typically offered, so you can choose the best account for you in 2020!
Checking accounts are probably the type of bank account that you’re most familiar with. These are typically the most-used type of account. Checking accounts give you unlimited access to your money. There may be a minimum deposit required to open an account (usually in the $25-$100 range), but after that, there are no minimum balance requirements. These are great accounts to use for everyday purchases and direct deposits.
A savings account was likely the first type of account you opened, sometimes along with a checking account. Savings accounts are a place to, as the name suggests, save money. There are restrictions for how many withdrawals you can make from your savings account, because the primary purpose is to store money in the account without moving it around. Savings accounts also earn a small amount of interest on the money you keep in the account.
Money Market Accounts
A money market account combines features of checking and savings accounts. It allows you more access to your money than a savings account will (but still has a limit to the number of withdrawals you can make per month). However, money market accounts also pay more interest than a standard savings account will. If you’re looking to earn a little more interest on your money, but still want some access to the funds, consider opening a money market account. Be aware, though, that some have minimum deposit requirements that can range from $5,000 to $10,000.
Certificates of Deposit (CDs)
If you want to get into investing, but are concerned about the risk, certificates of deposit are a great way to start. Also called CDs, these are a low-risk way to earn more interest than the types of accounts listed above will. When you open a CD, you’ll commit to putting your money in it for a set period of time. This can range from anywhere from six months to five years. But if you know you won’t need access to it, certificates of deposit are a great way to get a return on your money.
You might think saving for retirement is a long way off, but you can never start too early! Many banks offer IRAs, or Individual Retirement Accounts, to give people a tax-advantaged way to put money aside for retirement. If you are under the age of 50, contributions to these types of accounts are limited to $5,500 per year. (After 50, you can invest an additional $1,000 a year.) IRAs follow the same types of rules as 401(k)s, where you can only withdraw without penalty when you turn 59 ½.
Now that you know what the different types of bank accounts exist, check out our article on how to open a bank account here!