At SmartCapitalMind, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.
What are Different Types of Bank Accounts?
Nicole Madison
Nicole Madison
There are several different types of bank accounts. Understanding them all can be difficult, as each banking institution may offer a broad range of account types. However, most accounts fall into one of five categories. By learning the different account categories, you can make deciphering the choices offered at your banking institution much easier.
A checking account is a bank account that uses checks as the primary instrument for withdrawing money. With a checking account, you can make purchases, pay bills, and give or loan money to anyone you choose. You can also use a check to transfer money from your checking account to a bank account at a different financial institution. Usually, financial institutions allow account holders to make as many deposits and withdrawals as they wish. Many allow account holders to make withdrawals and deposits through automatic teller machines (ATM) as well.
A savings account is another type of account that allows the holder to make deposits and withdrawals. However, savings accounts are not as flexible as checking accounts. Often, holders of this type of account are limited in the number of withdrawals and deposits they can make each month. Also, savings account holders are not able to access their money with checks. Many financial institutions allow savings account holders to make deposits and withdraw funds through ATM, however.
Another type of bank account is a money market account. This type of account pays interest at a higher rate than the rate paid on interest-bearing savings and checking accounts. Often, money market accounts impose a minimum balance for the account to start earning interest. The minimum required balance on a money market account is usually higher than that imposed on a checking or savings account. With a money market account, withdrawals are limited to six per month. No more than three of these withdrawals can be by check.
Time deposits, frequently referred to as certificates of deposit (CDs), are bank accounts that require the account holder to make a deposit and agree to leave funds in the account for a specific amount of time. In return for this agreement, the financial institution pays interest to the account. Often, the interest paid on a CD is higher that the rate paid on other types of account. The account holder is required to keep his or her money in the account until the specified term is over. However, some financial institutions allow account holders to withdraw interest, without affecting the principal. In some cases, account holders may be allowed to withdraw their principal funds before their CD matures, but a penalty is typically charged.
Some financial institutions also offer basic, no-frills bank accounts. A no-frills account may allow the holder to pay bills and cash checks without paying the high fees associated with completing such transactions without an account. An account of this type will likely allow for only a limited number of checks, deposits, and withdrawals to be processed in any given month. In most cases, interest is not paid on a no-frills account.
Nicole Madison
Nicole’s thirst for knowledge inspired her to become a SmartCapitalMind writer, and she focuses primarily on topics such as homeschooling, parenting, health, science, and business. When not writing or spending time with her four children, Nicole enjoys reading, camping, and going to the beach.
Learn more...
Nicole Madison
Nicole’s thirst for knowledge inspired her to become a SmartCapitalMind writer, and she focuses primarily on topics such as homeschooling, parenting, health, science, and business. When not writing or spending time with her four children, Nicole enjoys reading, camping, and going to the beach.
Learn more...AS FEATURED ON:
AS FEATURED ON:
-
![Access to an ATM is often part of both checking and savings accounts, but savings accounts are not as flexible as checking accounts.]()
By: sanjagrujicAccess to an ATM is often part of both checking and savings accounts, but savings accounts are not as flexible as checking accounts. -
![Banks usually allow checking account holders to make as many withdrawals and deposits as they wish.]()
By: JohnKwanBanks usually allow checking account holders to make as many withdrawals and deposits as they wish. -
![Certificates of deposit and money market accounts offer higher interest earnings than checking and savings accounts, but they come with more restrictions.]()
By: ã«ã·ã¹Certificates of deposit and money market accounts offer higher interest earnings than checking and savings accounts, but they come with more restrictions. -
![Certificate of deposit accounts -- commonly called CDs -- require letting a bank hold a certain amount of money over a period of months or years, and the payoff is high interest rates.]()
By: jeff MetzgerCertificate of deposit accounts -- commonly called CDs -- require letting a bank hold a certain amount of money over a period of months or years, and the payoff is high interest rates. -
![Many people have a primary checking account, but they may also have checks for other accounts as well.]()
By: JJ'StudioMany people have a primary checking account, but they may also have checks for other accounts as well.
Discussion Comments
In time, will you be able to keep your student account, or will you be pushed to have a real bank account?
@alisha-- I think a checking account is the best account for students and young professionals. I've had one for years and it has been working really well for me. I have a debit card for my checking account that I use for everyday needs. I just make sure that I have enough money in the account when I'm spending because if you do an overdraft, the bank charges crazy fees until you deposit more money.
Overdraft is when you take out more money than there is in the account. It's really silly if you think about, why do banks even allow people to withdraw more than they have? It's to charge them fees. But it's sad because someone can suddenly start owing the bank a lot of money that way.
But if you keep an eye on your account (which is so easy nowadays with online banking), you won't have any problems.
What's the best student bank account?
If you want to withdraw money easily and also save money though, you probably want both a checking and a savings account.
You could just get a savings account but it will be hard to withdraw money when you need it. Some banks don't even allow the withdrawal of money for a certain period of time when you open a savings account.
Informative, but can I have more details because children need these topics for their project, for which they need more details.
thank you. i am now on my own with my own bills and this has helped a bunch. -tori
Thanks. This really helped. I run a company that involves a lot of bank deposits by clients and sometimes even out of the country. What is the best account for this?
Thank you so much for a clear details concerning banking.
which is better, an account that earns compound or simple interest? i really do want to know.
what difference does the interest rate make in a savings account and in a checking account?
how much better is a savings account than a checking account?
I'd like to own a house with two other people, and would like to have it in the three joint names (all members of the same family). Similarly I would like a bank account to manage said house, run or accessible by all three house owners, and one or two rooms in the house would probably be rented out. What sort of account do I need? (no share dealing thanks!) Thank you.
thanks this article has helped me a lot for my maths project-banking.
thanks. this really helped.
thanks! helped me a lot.
You want to save money, but you need to pay monthly bills. What type of account should you open?
can i get interest on an amount held in my current account?
Reg D just changed. Under Money Market Account it sates that only three withdrawals can be by check; this is no longer true. There is still a limit of six withdrawals per month, but there is no particular limit on any one type of withdrawal.
Can a statutory corporation operate a savings bank account for a government fund?
what is the received money module?
Post your comments