Bank accounts can be confusing, but they don’t have to be. Here’s a simple guide to the most common types of accounts and what they’re good for.
Most Common Types of Accounts
- Checking Account – This is your go-to account for spending money day to day. You can use a debit card, write checks, set up bill payments, and transfer money easily. It’s great for managing your income and expenses, but it usually doesn’t earn much interest.
- Savings Account – A safe place to keep money you don’t plan to spend right away. This account helps you save for future goals—like a vacation, emergency fund, or big purchase—while earning a little interest over time. You usually don’t get a debit card, so it’s easier to resist dipping into your savings.
- Money Market Account – This type is a mix between a checking and a savings account. It earns more interest than regular savings accounts but may come with higher balance requirements. You can still write a few checks or use a debit card occasionally, making it a flexible option for medium-term savings.
- Certificate of Deposit (CD) – A CD is for money you don’t need right away. You agree to leave the money in the bank for a set time (like 6 months or a year), and in return, you get higher interest. If you take your money out early, there’s usually a penalty.
- Online-Only Accounts – These accounts are offered by banks that don’t have physical branches. Since they save money on overhead, they often offer better interest rates and lower fees. Online accounts can be a great option if you’re comfortable managing your money digitally.
Other Helpful Account Types
- Student Account – Designed for students, these checking or savings accounts come with fewer fees, lower balance requirements, and often educational tools to help you learn about managing money.
- Joint Account – This is a shared account for two people, such as spouses or a parent and child. Both people can deposit and withdraw money. It’s helpful for shared expenses and budgeting together.
- Business Account – If you own a business, even a small one, you’ll want a separate account to keep your personal and business finances organized. Business accounts often come with tools for invoicing, payments, and tax tracking.
Choosing the Right Account
When choosing a bank account, think about what you’ll use it for:
- Daily spending? Go with a checking account.
- Saving for a goal or emergency? A savings account is your best friend.
- Want to earn more interest with a bigger balance? Try a money market account or CD.
- Prefer managing everything on your phone? Look into online-only options.
Looking for an account to manage your everyday transactions? Read Which Bank Account Is Best for Everyday Use.
Want to understand how checking and savings accounts compare? Here’s our guide on the Difference Between Checking and Savings.