Types of Accounts — The Big Four

Choosing the Right Fit
Once you’re ready to put your money in a traditional bank or credit union, you need to make sure you find the right fit. Here are four major account options:

1. Savings Accounts are highly flexible (liquid), allowing you to deposit and withdraw money whenever you choose. Savings accounts usually are interest-bearing, which means the bank pays you a certain rate for keeping your money there. Interest rates on savings accounts are typically very low.
   
   
2. Checking Accounts allow you to deposit money and write checks against that money. Checking accounts usually have a minimum deposit requirement and pay less interest than savings accounts, if any at all. Many checking accounts have a monthly maintenance fee if you do not maintain the minimum balance. Fees are typically subtracted directly from the account, so it is important to balance your checkbook regularly and manage your account to avoid overdrafts.
   
   
3. Money Market Accounts are similar to savings accounts, but usually have a higher interest rate, which can go up or down throughout the year. Some money market accounts require a minimum investment and/or minimum balance. Some money market accounts are liquid, allowing you no-penalty access to your money at any time. Others may have restrictions on how often you can access your money during a given time period without additional fees. Some money market accounts also allow you to write checks.
   
   
4. Certificate of Deposit (CD) Accounts allow you to deposit money for a set period of time, such as 6 months, 12 months, or 24 months. The interest rate is higher than a basic savings account and usually higher than a money market account, and it is fixed, which means it won’t change over the time of the CD. However, if you take your money out early before the agreed upon time period, you will be charged a significant penalty fee.