Different Types of Savings Accounts | Deposit, Money Market & Certificate of Deposit
There are several different types of savings accounts. The kind you choose will largely depend on your needs and money goals. For example, you’ll want to consider how much access to your money you might need and how quickly you want your savings to grow. Find out which type is best for you.
Different Types of Savings Accounts: Which is Best for Me?
Deciding on which type of savings account to open should not be overwhelming. One thing to keep in mind is that a savings account is designed to earn you some interest with little or no risk. There are three common types of savings accounts.
Deposit Savings Accounts
A deposit savings account is what most people think of when they think about opening a savings account. You can open one of these accounts with just a small deposit. The interest you earn is going to vary on where you open the account. Look out for fees. Depending on the financial institution’s opening requirements, you may be charged transaction fees or a minimum deposit fee.
Money Market Accounts
A money market account is a savings account option that may pay a higher interest rate than a deposit account, depending on where you have the account. With this type of account, you usually have to maintain a higher balance. The good thing about this type of account is that you can write checks against your balance, something you can’t do with a deposit savings account. Bear in mind, there are limits to the number of checks you can write per month as this is not a checking account.
Certificate of Deposit
Certificates of deposit, often called CDs, require you to lock your savings away for a set amount of time. During that time, if you choose to withdraw funds, you will pay a penalty. When your set term period ends or matures, your money is usually reinvested in a new CD for the same term unless you withdraw your money. This account traditionally offers the highest interest rates of any savings account type. The longer the CD term, the higher your interest rate.
Traditional bank savings accounts are typically insured by the Federal Deposit Insurance Corp., or FDIC, for up to $250,000 per depositor, per insured bank, for each account ownership category.
With federal (and some state) credit union savings accounts, your funds are insured by the National Credit Union Administration, or NCUA. Up to $250,000 of your savings account will be insured with a participating credit union.
It’s always a good time to start saving. Consider how your options can help you toward your goals, and then select a savings account that fits your needs.