Types of Savings Accounts: Where to Stow Your Cash

Margarette BurnetteJanuary 21, 2020
Types of Savings Accounts: Find the One You Need

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Types of savings accounts

Most banks have these three:

  • Regular savings account: earns interest and offers quick access to funds

  • Money market account: typically earns more interest than a regular savings account in exchange for higher balance requirements; some provide check-writing privileges and ATM access

  • Certificate of deposit: usually has the highest interest rate among savings accounts and the most limited access to funds

Regular savings accounts

EARNS INTEREST, ALLOWS QUICK ACCESS TO FUNDS

Rates: Traditional banks have savings rates as low as 0.01% annual percentage yield. At that rate, an account with $1,000 would earn $1 in interest in a year. But some online banks have high-yield savings accounts offering about 2% APY, which is competitive with money market rates. Those banks are federally insured like their traditional counterparts. Compare three accounts with top rates below.

Account access: Certain withdrawals and transfers, including online transactions, are limited to six times per month by federal law. In-person requests at a branch, among some other methods, aren’t subject to these limits. For unlimited account access, you’ll want a checking account. (You can read up on checking accounts here.)

» See the latest: Best savings rates right now

Money market accounts

MAY HAVE BETTER RATES, HIGHER BALANCE REQUIREMENTS

Rates: Money market accounts tend to pay higher rates than brick-and-mortar banks’ savings accounts, but they typically require a balance of $1,000 or more to avoid monthly fees.

Account access: Some money market accounts come with a debit card and checkbook. But the six-per-month limit still applies to certain kinds of withdrawals, including by check or debit card.

Note: Like other savings vehicles, money market accounts are federally insured to protect your money. This differs from money market funds, which are a type of investment account.

Certificates of deposit

TOP RATES, LIMITED ACCESS TO FUNDS

Rates: CDs tend to pay the highest interest rates of the three accounts.

Account access: None. You must agree not to withdraw the money for a certain amount of time, called a "term." If you take your money out before that, you’ll likely pay an early withdrawal fee.

Note: CD terms typically range from about six months to five years. The longer the term, the better the interest rate. Institutions also offer higher rates for large deposits in jumbo CDs. But you’ll find some of the most competitive CD rates at online banks.

» To compare CD rates, see our top CD rates for this month

Cash management accounts

High interest rates, not actually a bank account

Rates: CMAs tend to have high interest rates that are comparable to high-yield savings accounts

Account access: Depositing and withdrawing cash is a challenge with some CMAs, but electronic transfer between CMAs and outside bank accounts is usually easy.

Notes: While CMAs have features that are similar to those of checking and savings accounts, CMAs are not actually bank accounts. CMAs are offered by nonbank financial service providers — like robo-advisors and investment firms — that sweep customer funds into partner bank accounts in order to provide FDIC coverage behind the scenes. If you have an investment account with the same provider, you can usually link it to your CMA for quick money transfers.

Specialty accounts

If you’re looking for tax benefits as you save for specific savings goals, such as your kids’ college fund or health expenses, consider Roth IRAs, 529 plans and health savings accounts. Some of these are investment accounts, which can be part of your savings strategy.

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