4 Types Of Bank Accounts In the United States

In the United States, there are four main types of bank accounts. Each bank you will go to open a bank account will offer the same or a variety of these bank account types. Choosing a bank account to open will depend solely on the financial needs you want met by a bank.

Here is what you need to know.

What Types Of Bank Accounts Are There?

There are four common types of bank accounts offered by American banks. I will elaborate on the different bank account types below for you.

1. Savings Account

A savings account is best for squirreling away money. This is especially, when you are trying to meet a saving goal. Whether you are saving money for emergency fund, or getting your first apartment, a savings account is a good bank account for it.

Why is a savings account important?

Usually, this type of bank account has no fees attached to it. It does not require you to deposit monthly to keep the account open for you. You can go for months without bank deposits in the account, and it will still be an active account.

Because a Savings account is designed for savings, it has interest attached to the money it is holding. A traditional savings account will yield an average interest of 0.45%. You could get up to 4% APY interest on your savings, when you go for high yield savings accounts. You read how savings accounts work In the US for more explanation.

What Are the Pros And Cons Of A Regular Savings Account?

I feel like understanding a Savings account requires knowing about its pros and cons. I have created a table below to help.

Pros Of A Savings Account	Cons Of A Savings Account
Interest rates on Savings	Requires an initial deposit
Easy to open	Lower yield on savings compared to other bank accounts
Best for first-time bank account holders	Does not typically come with a debit card or check book
Most are free. Otherwise, it will require you to have a minimum account balance to avoid being charged.	Limit withdrawals to six per month

The importance of a Savings account cannot be neglected for the average working class adult. It encourages us to save. However, it is not ideal for anyone who wants to use it for daily expenses. If your goal is to pay for expenses or write checks from the account, it is not for you.

You can use this type of bank account for meeting saving goals. This is especially, when you are counting on your savings generating interest. You can read 7 best high yield interest savings accounts to see high interest savings accounts that will help you meet your saving goals.

2. Checking Account

What is a checking account, my good reader?

A checking account is the type of bank account best for everyday transactions. It is for you to put money into, in order to have a quick access each time you want to pay for goods or services. A checking account comes with a debit card and a check book. Two things you need to pay for goods and services in the United States Of America, besides the almighty dollar.

Types Of Checking Accounts

Checking accounts in the United States of America are usually classified into three groups:

• Basic checking account
• High interest checking
• Business checking account

Some banks may have other variations of a checking account, but they will fall under these three groups. I recommend going for the basic checking account. You may hear this type of bank account called a flexible checking account.

Most basic checking accounts will not charge you to maintain the account. This is especially, when the account is offered by a bank tailored to young working class adults. An example of such a bank would be a credit union. If you have maintained an account with a credit union before, you will know the experience what I am talking about.

Ways To Choose the Right Checking Account

Choosing a checking account depends on the financial needs behind the decision. If you want a checking account for your daily expenditures, consider the following below:

• No-fees checking account
• No minimum balance requirement
• A checking account with no monthly fees to maintain it

These three will get you started on the right path of having a great checking account, which will not end up being a burden to you. Did I ever tell the story of my first checking account during my first year living in the United States?

It was with a bank, which charged me monthly fee to maintain the basic checking account. I was miserably paying a few hundred dollars annually just to have a checking account. When I learned it was not the norm in the United States, I had to close my account and find a better bank.

So, do not be like me. Go for a check account which will not end up being a financial burden to you. This is especially, when you are using the checking account for personal use.

Pros and Cons Of A Checking Account

You cannot do without a checking account. This is because this account type gives you access to a debit card and a check book. Here are some pros and cons of a checking account you should be aware of, when going for this account type.

Benefits of a checking account	Cons of a checking account
Access of a debit card and check book	Might have monthly maintenance fee
FDIC insured- meaning the money in a checking account is insured.	Might require a minimum monthly balance
Tracks your spending.	Your money may not generate interest.

Do not let the cons of a checking account deter you. In my personal opinion, choosing a bank account tailored to your financial needs will avert any future issues. Be sure to express concerns to a bank, prior to opening a bank account.

3. Certificate Of Deposit (CD) Account

What is a CD account?

A certificate of deposit account lets you save money for a fixed interest rate over an agreed period of time. This is usually offered by a bank with the intention of helping customers hit personal saving goals. A CD is similar to a savings account, but it is a saving account you cannot touch.

What do I mean by this, my dear reader?

Banks offer to lock your money for a certain period of time, so you cannot withdraw money from the account. While the money is locked, it accumulates a fixed interest rate. According to the Federal Deposit Insurance Corporation on 2025 National Rates, CD rates today range from 0.22% for a month CD to 1.31% for a 60-month CD. This is a percentage of any money on a certificate of deposit will generate for you. It is often higher than your regular savings account. Your regular savings account will give you a national average rate of 0.45%.

How To Open A CD

To open a CD account, here is what you need to know.

• compare the CD rates offered by banks
• Call or go in at the bank which offers the rate you like
• Take some documents like social security card, driver’s license and the bank’s minimum deposit value for CD accounts.
• Choose how long you want your money in the CD account
• Make the deposit and collect the necessary documents

This type of bank account is for people who have cash with no plans for it. You can deposit from $500 upwards. As long as you have no immediate need for the money, the CD account will lock it for you with an agreed fixed interest rate.

I recommend reading through the certificate of deposit contract before signing it. This is because there are penalties for withdrawing money from a CD account before the maturity time (agreed time). Each bank charges a different amount.

Benefits Of A CD account

A CD account limits the temptation of spending money in a savings account. This is because there is a penalty on early withdrawal. It tends to discourage a lot of people from attempting withdrawals.

Additionally, a certificate of deposit account offers more interest on your money than your regular savings account. I do not like using a CD account for savings goals, unless I wish to part with some money for a while. This is because there are some high yield interest savings accounts out there who offer a higher interest rate than CD accounts.

Finally, certificate of deposit is for anyone who has money he or she does not want to part with. This is especially, when you do not know what to do with the money. You can keep it in a certificate of deposit, until you figure out how to spend or invest it. You can read how CD works for some of the best CD rates in the US.

4. Money Market Account

A money market account is similar to a savings account and a checking account. This is because your money will generate interest on it. The interest rate is higher than a regular savings account. Besides the interest rate, some money market accounts let you deposit and withdraw money with ease.

Here is the catch, friend.

The number of withdrawals per month is limited. Interest rates offered in money market accounts are usually variable interest rates. That means it fluctuates. In addition, account requirements tend to be high. What I mean by this, is the minimum balance might be higher than a usual bank account’s.

Given the pros and cons of a money market account, why would you go for it?

Well, this type of bank account is recommended for anyone trying save for an emergency fund. You will earn an average national interest rate of 0.63%. Some money market accounts pay higher than the national average. Be sure to compare with other competitive rates out there. This is especially, when there is a huge amount of money involved.

What Type Of Bank Accounts Should I Open?

Personally, I recommend opening a regular savings account and a basic checking account. This is especially, when you are a young working class adult trying to make ends meet. You could use the savings account for savings, while the basic checking account takes care of your daily expenses.

What if your goals are strictly for saving money?

The best saving accounts are high-yield interest savings accounts. You can read what are high yield interest savings accounts to learn more about it. One thing I like about this type of savings account, is the interest rate can be up to 4.50%.

Oh yes- I kid you not.

For anyone trying to save money, I also recommend you read where to put your savings to beat inflation. I discuss more on CD accounts, High interest accounts and stock investments on the article. It is a good read.

Finally, the regular savings and basic checking accounts I mentioned earlier is perfect for working class adults. You will have access to a debit card, a check book, quick withdrawals or deposits. These two types of bank accounts will help you manage your art of living.

How Many Bank Account Should You Have?

You need two bank accounts to function normally as a working class adult. You need both savings and checking accounts. The checking account will take care of your day to day spending, since it comes with a debit card and check book.

On the other hand, your savings account could be a high yield interest savings. It does not have to be a regular one. This is especially, when you are using your savings account strictly for savings. Now, does that mean you can only have two bank accounts?

No, it does not.

You can have as many as you want, as long as they are not a financial burden to you. There are various types of bank accounts. Personally, I have a brokerage account, a high-yield savings account, a regular savings account and a basic checking account. These help my life as a young working class adult.

There are different types of bank accounts out there. Each bank creates a variate of these four I mentioned in this article. You just have to figure out what your financial needs are and know which account type will fulfill the needs.