Let us help you choose the account type that best fits your goals and the financial institution that provides the finest one, whether you’re wanting to store your money for the long or short term (or both).
Different types of bank accounts
Keep in mind that some banks and credit unions provide distinct versions of the accounts below for teenagers, college students, and seniors.At FDIC-insured banks and NCUA-insured credit unions, all types of accounts are covered up to $250,000.
For day-to-day banking, such as depositing your paycheck, withdrawing cash, and paying bills, use a checking account.Checking accounts usually allow you to access your money in a variety of methods, including debit cards, ATMs, and personal checks, and they don’t limit the amount of transactions you may make per month.
Remember that most checking accounts pay no interest, and those that do will pay you less than you would if you deposited your money practically anywhere else.
What to look for: Reasonably priced services.
Look for an account with no monthly maintenance fees, no minimum balance requirements, fee reimbursement for ATM transactions outside the bank’s network, and/or a tolerant overdraft policy.
Keep an eye out for the last one. If you’re not careful, even a small transaction could overdraw your account — and the average overdraft fee runs to $34. Fees vary by bank or credit union. If your bank allows it, sign up for phone or email alerts that let you know when your balance is running low.
A basic savings account gives you a safe place to store your money, but also lets you access funds quickly — say, in the event of a medical emergency, a sudden job loss, or a trip you’re planning this summer. However, it may impose a monthly limit on the number of transactions you can do.
In exchange for the relatively easy access they offer, most savings accounts earn very little interest. The national average rate for a savings account is currently 0.06%. But you can find online ones that offer rates upward of 1.2%.
What to look for: The best possible rate.
And it’s most likely at a credit union or an online-only (FinTech) bank.
Money market account
Money market accounts, like savings accounts, are used to hold cash that isn’t needed immediately away.
They provide slightly higher interest rates than ordinary savings accounts — the national average is 0.06 percent — but sometimes have higher minimum balance restrictions.
They may also include the capacity to write cheques in some circumstances.
They do, however, allow less access to funds in general.
What to look for: The proper balance of flexibility and growth, based on the amount of money you want on hand and your risk aversion.
If you want more flexibility, online savings accounts with comparable rates and more access are available, and you can grow your money faster in an investing account.
Certificate of deposit (CD)
A certificate of deposit, also known as a CD, is a timed investment:
You agree to leave your money with the bank for a fixed period of time — often a few months to five years — in exchange for the bank’s highest savings account interest rate.
The higher the rate, the longer the term.
The national average rate for a three-month CD is 0.08 percent; for a six-month CD, 0.13 percent; and for a one-year CD, 0.14 percent.
Currently, the national average for a five-year CD is 0.27 percent.
What to look for: Does breaking the contract cost?
Make sure you’re comfortable with the contract before signing it, as breaking it before the end of the term will result in a penalty.
Ask questions before you commit to a CD because they come in a variety of kinds that assist you maximize your returns and have stricter requirements. You’ll want to make sure your funds are in the account that best meets your needs.
You can open an account once you’ve decided on a bank and an account type.
You may usually accomplish this in person, online, or over the phone if you have proper identification — a driver’s license, state ID, military ID, or passport all count — personal information, such as your address and Social Security number, and money to fund the account.Branch offices accept cash, a check, or a money order, whereas online-only accounts accept funds from a check or a linked debit or credit card.
If you’re applying for a joint account, the other person you’re applying with must also supply information, and if you’re a minor, you must be accompanied by an adult.
Last but not least, you don’t have to keep all of your accounts in the same place.
A nice checking account at a local credit union, a strong savings account online, and an appealing CD at a bank are all possibilities.