TYPES OF BANK ACCOUNTS

Checking accounts

Checking accounts allow you to have easy, day-to-

day access to the money you deposit into them. There
are usually no minimum account balances required —
you just have to keep enough money in your account to
cover your purchases. This is important to avoid
overdrawing your account. Overdrawing your account
means that you’ve spent more than you have in the
checking account, and your bank pays the full amount
of your purchase. When you overdraw your account,
you almost always have to pay fees.
 Savings accounts
Savings accounts allow you to earn interest on the
money you deposit. But as the name suggests, these
accounts are meant for saving money. So there is a
restriction on the number of certain types of
withdrawals or transfers you can make in a month and
usually a daily minimum balance requirement.
Earning interest sounds great — who wouldn’t want
to earn money just for having money? Keep in mind,
though, that the interest your account
earns is considered income and is therefore taxable.
 Money market accounts
A money market account is a cross between a
savings and checking account. Banks typically offer a
higher interest rate on money market accounts than on
savings accounts, and can also give you limited
monthly access to your money via checks and a debit
card. You can only make up to six withdrawals or
transfers of a certain type from a money market
account per month — and, fortunately, just like savings
accounts, neither ATM nor in-person withdrawals or
transfers count toward the six-withdrawal limit. The
interest rate you earn can depend on the amount you
have deposited.
 Certificates of deposit (CDs)
Certificates of deposit can be a low-risk way to invest
your money for a specified period of time at either a fixed
or variable interest rate. CDs are considered low risk
because if you get one with a fixed interest rate, you’re
guaranteed to earn that percentage rate on your deposit
until your CD matures. Typically, CDs with longer periods
offer higher interest rates. That means a CD that matures
in five years will typically earn interest at a higher rate
than a CD maturing in two years. CDs are often attractive
savings tools because they typically earn higher interest
rates than a traditional savings account. One thing to keep
in mind is that CDs have early withdrawal fees. If you
withdraw money from the CD before it matures, the fees
can be expensive.
 Individual retirement arrangements (IRAs)
An individual retirement arrangement (also known
as an individual retirement account) is a savings tool
the IRS created as a way to give people an easy avenue
to save for retirement.

a tax-favored personal savings arrangement, which

allows you to set aside money for retirement.
 Brokerage accounts

Brokerage accounts give you another way to invest

your money. With a brokerage account, you can invest
in stocks and bonds. You can earn money buying
stocks if you sell them at a price that’s higher than
when you bought them. You can also earn dividend
payments, which is when a company distributes some
of its earnings to shareholders.
 Account type Why you might want it
You want unlimited access to your
Checking account money and you’re not concerned
with earning interest.
You don’t need constant access to
this money and can afford to leave it
Savings account
in a secure account where it will
earn nominal interest.
You want a blend between a
checking and savings account and
Money market account
only need limited access to this
money each month.
You want a secure way to invest
Certificate of deposit (CD)
your money for a set period of time.
You want a tax-deductible or tax-
Individual retirement arrangement (I deferred way to invest your money
RA) for retirement.

You want buy and sell securities like

Brokerage account
stocks, bonds and mutual funds.