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
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.