Savings Account Overview
Types of Bank Accounts
Bank accounts offer convenience, safety and security for your money. Whether you bank online or prefer a traditional bank or credit union, there are numerous account options from which to choose.
Different types of bank accounts can serve different purposes, depending on your needs. Some allow you to spend or pay bills, while others are designed for short- or long-term savings. The most common types of bank accounts include:
- Checking accounts
- Savings accounts
- Money market accounts (MMAs)
- Certificate of deposit accounts (CDs)
Understanding how the different types of bank accounts compare can make it easier to decide where to keep your money.
Savings Account Basics
A savings account is a deposit account that can be used to hold money you don’t plan to spend right away. Most savings accounts pay interest on deposits, though the interest rate and annual percentage yield (APY) can vary significantly from bank to bank.
Like checking accounts, savings accounts may have minimum balance requirements and monthly maintenance fees. But they typically don’t come with a debit card or ATM card and you usually can’t write checks from them.
That’s because savings accounts aren’t designed for everyday spending or paying bills. Ordinarily, federal Regulation D limits you to six withdrawals from a savings account per month. These limits have been suspended indefinitely to make savings more accessible for people who may be struggling financially as a result of the coronavirus pandemic.
You should know, however, that your bank can still impose a fee for exceeding six withdrawals from savings per month. This is called an excess withdrawal fee and banks can apply it to each transaction over the six-per-month limit.
How to Choose a Savings Account
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.
An online bank, on the other hand, may charge fewer fees and offer higher rates for savers. High-yield savings accounts, for instance, often offer an APY that’s significantly higher than the national savings APY, depending on the bank.
If you can get a better APY at an online bank, it may be worth trading the convenience of having access to a branch. As you look at different savings options and the APY you could earn, pay attention to fees and minimum balance requirements.