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Types of Bank Accounts
Where you put your money can be as important as what you do with it.
With slight variations depending on region or type of financial institution (bank versus credit union, for example), there are generally three types of bank accounts, each with their own distinct purpose and impact on your day-to-day life: checking, savings, and money market accounts. By being informed about each, you can leverage them to balance liquidity and earning potential. Banking is composed of deposits and lending. We will first start with deposits.
Checking account
As the most common type of bank account, a checking account provides a place to keep your money, which is then accessible by writing checks, through transfers, or by debit card. Checking accounts are most often used to pay bills, transfer funds (PayPal, Venmo, Zelle), or draw cash. They offer the ease and convenience of quick access to your funds, without the need to carry cash. For the privilege, your bank may charge a monthly or annual fee, which may be waived based on your relationship balances.
Savings account
Similar to a checking account, a savings account is another way to store your money at a higher rate until you need it. Unlike a checking account, savings accounts earn interest (the rates are usually posted at your bank branch or website), but cannot be used directly as money (for example, by writing a check). Savings accounts let customers set aside a portion of their funds while earning a monetary return.
Money market account
Money market accounts are interest-bearing accounts that generally pay a higher interest rate than regular savings accounts and often include check-writing and debit card privileges. They may also come with restrictions that make them less flexible than a regular checking account.
You could lose money by investing in a money market fund. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.