Five Different Types Of Banking Accounts
Banks are about as old as money itself. Whether it's a hole in the ground that people have put copper coins in or a highly complex, artificially intelligent system that calculates net returns by the second, everyone needs a place to store their hard-earned currency.
But not every banking account is the same. In fact, though there are five listed here, there are probably hundreds of different types of places to keep cash, and hundreds of variations of those banking accounts, suited for every different style and purpose. Here are some of the most common types of banking accounts.
The most common type of banking account that is in use today is a checking account. The main reason that people open checking accounts is for convenience — they want to be able to use their money whenever they want. The fees are low, but so are any interest returns, which makes this type of account best for flexible spending purposes.
Not quite as popular as a checking account, savings accounts nevertheless serve an important purpose. They hold your cash for longer periods of time and give a minimal rate of return with interest. They're not as flexible as checking accounts — indeed, some may charge you a penalty for withdrawing too often — which means they're primarily designed to be added to and not taken from unless necessary.
Certificate of Deposit (CD)
Certificates of Deposit, or CDs as they're commonly called, are another type of banking account that is offered by banks. When you use a CD, you lock in your money for a predetermined period of time and receive interest at a much higher rate. The longer your money sits inside the CD, the more interest you'll receive, so if you want to put some money somewhere and forget about it, a CD is a great choice.
Money Market Accounts
Think of a money market account as a hybrid between a savings and checking account. These accounts offer flexible withdrawal rules but also deliver a higher interest rate than checking accounts. They're a great option if you plan on keeping money secure for a long time but still would like regular access.
Though technically still a form of banking account, brokerage accounts allow you to invest your money into stocks and bonds, receiving dividends as a result. It's tougher to pull the money out of them and the investment aspect makes your account more volatile, but you can also reap great rewards if you invest in the right places.