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Bank Account Types and What you Must Know About Them

No two bank accounts are the same or serve the same purpose. Knowing your financial goals, including total returns, your timeline, and necessary accessibility will help you choose the right account.

Here’s what you need to know.

Checking Account

Use a checking account as your spend account. Checking accounts usually come with a linked debit card for easy access to your funds. You can also write checks and make deposits. This is the account you pay bills with and cover your daily cost of living.

Most checking accounts don’t pay interest. Those that do have a minimum balance requirement.

Who Should Get One?

Everyone needs a checking account. If you earn a paycheck and/or have bills to pay, a checking account provides the easiest access to your funds.

Savings Account

Savings accounts are a place to keep your funds safe. Most savings accounts pay minimal interest, allowing your money to grow. It’s a great first bank account for kids and teens. Savings accounts are also a great place to keep the money you don’t need for bills and want to save for emergencies or other savings goals.

Who Should Get One?

Kids, teens, and anyone with a checking account and financial goals that don’t want the temptation of having the money in their checking account should open a savings account. Funds are still easy to access if you’re in a pinch, but leave them if you can.

Certificate of Deposit

CDs or Certificate of Deposits are similar to savings accounts except you tie your money up for a specific period. Once you deposit the funds in the CD, the money remains there until maturity. If you leave the money for the whole term, you earn the full interest, which is usually greater than the interest earned on a savings account.

If you withdraw funds early from a CD, you’ll pay a penalty fee, which is usually around 3 months of interest.

Who Should Get One?

Anyone with money they don’t need right now can earn higher rates of interest by tying it up in a CD. They range in terms from 1 month to 10 years.

Money Market Account

A money market account is a cross between a checking and savings account. They earn higher rates of interest because they require higher balances (usually $1,000 or more). Money market accounts come with check writing privileges, but you may only make up to six withdrawals a month or you’ll pay a hefty penalty.

Who Should Get One?

If you have a large amount of money to put in a money market account and keep it there, your money will grow faster with the higher interest rate. You can access the funds (limited), but the idea is to earn more interest.

Find the Bank Account that’s Right for You

Today you can get a bank account at your local bank or credit union and online banks. You have many more options than ever before, so shop around to find the bank offering the highest APYs and lowest fees for the services you need.

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