Essential Types of Bank Accounts You Should Know

Banking options come in various forms. Here’s a guide to the fundamental types of bank accounts:

Savings Accounts: Designed to promote savings habits, these accounts earn interest on deposited funds. They generally restrict the number of withdrawals to encourage saving and typically do not support check writing. Some banks impose fees if your balance falls below a specified minimum.

Basic Checking Accounts: Offering essential banking services at low costs, these accounts allow simple transactions like deposits and withdrawals but lack advanced features.

Interest-Bearing Checking Accounts: Unlike basic checking, these accounts permit unlimited check writing and provide additional features, making them suitable for small businesses. They also earn interest based on your account balance, though fees may apply if minimum balances aren’t maintained.

Money Market Deposit Accounts (MMDAs): These accounts invest your funds in short-term debt instruments, offering higher interest rates than standard checking accounts. They often require a higher minimum balance and limit transfers to six per month, with three allowed via checks.

Certificates of Deposit (CDs): Also known as time deposits, CDs lock your funds for a fixed period ranging from three months to several years. In return, you receive a higher interest rate, with access to the money restricted until maturity.