Types of Bank Accounts

With so many types of bank accounts available, it can be challenging to choose. The first step is understanding how each account works, so you can find ones that meet your needs.

For example, a high-yield savings account (HYSA) might make sense for long-term savings goals. Or a business bank account might work better if you need to separate your business and personal finances.

Let’s explore the different types of bank accounts, from standard checking and savings accounts to certificates of deposit (CDs).

Checking accounts

A checking account is a bank account that lets you receive deposits and make payments. It can be a solid option for everyday transactions, from paying rent and buying groceries to receiving paychecks.

Typically, you can make payments from your checking account using a debit card, ACH or wire transfer, check or peer-to-peer payment app (like Zelle^®). You can also receive payments like direct deposits.

Checking accounts usually come with a debit card that allows you to make purchases and withdraw money from ATMs. In-network ATMs are often fee-free, while out-of-network ATMs can come with fees.

Checking accounts typically don’t earn interest, but some financial institutions may offer ones that do at low interest rates.

Best for: everyday transactions, accessing your money, sending money

Pros

• Easy access to funds
• Unlimited withdrawals
• ATM withdrawals
• Debit cards

Cons

• Low or no interest
• Potential fees, such as for monthly maintenance or out-of-network ATM use

Savings accounts

A traditional savings account is a bank account that lets you store and grow your money. Interest rates are generally variable and may be low compared to options like a high-yield savings account. Still, most savings accounts earn compound interest. That means you can earn interest on your deposits as well as on the earned interest as it becomes part of the principal over time.

Your funds are still generally accessible in a personal savings account. That means they can work for both short- and medium-term savings goals, like buying a car or building an emergency fund. However, some banks may limit the number of withdrawals and transfers you can make per month.

Best for: Building an emergency fund or saving for a short-term goal, like a vacation

Pros

• Can earn interest
• Allows you to separate savings from money needed for everyday transactions
• Funds are generally accessible

Cons

• Interest rates can be low
• Withdrawals may be limited

Money market accounts (MMAs)

MMAs are essentially the same as savings accounts. They may offer check-writing privileges or a debit card. They provide a dedicated account for your savings. MMAs typically also have a variable interest rate that compounds. Notably, though, the rates can be higher than those offered by traditional savings accounts.

There can be important limitations with these types of accounts. While some MMAs may have unlimited withdrawals and transfers, some may have limits. You may have to meet a minimum deposit or balance requirement, too.

Best for: Saving for emergencies or medium-term goals, such as a home down payment

Pros

• Earn interest
• APYs may be higher than traditional savings accounts
• May allow you to write checks
• Easy access to your money

Cons

• May require a minimum deposit
• May come with monthly fees
• Withdrawals and transfers may be limited

High-yield savings accounts (HYSAs)

HYSAs can offer higher APYs than traditional savings accounts. (The rates are usually variable, and like savings accounts and MMAs, interest is typically compounded.) Some HYSAs may also be fee-free, have low fees or waive fees if you meet a certain minimum balance requirement.

In exchange for those perks, you may have to meet specific requirements. For instance, HYSAs may have minimum deposit or balance requirements to earn the highest APY. Or there may be fees for exceeding the account’s withdrawal limit.

Typically, HYSAs are available from online-only banks. That means your money may not be as accessible as it would be in a traditional savings or checking account.

Best for: Earning interest on short- or medium-term goals while keeping money relatively accessible

Pros

• Higher APYs than traditional savings accounts
• Can help you separate savings from money needed for everyday transactions
• May be fee-free

Cons

• Withdrawals may be limited
• Funds may be less accessible than a traditional savings account
• May have minimum balance requirements and additional balance requirements to access the highest APY

Certificates of deposit (CDs)

Traditional CDs are a savings vehicle that requires you to deposit funds for a set period, usually a few months to a few years. You earn interest (which generally compounds) on your deposit over your chosen term. Once the term ends, you can usually withdraw the money during the grace period, which lasts a few days, or let the CD automatically renew for a similar term at the current rate. Rates are typically fixed and withdrawing money early can result in an early withdrawal penalty.

There are many types of CDs, from fixed rate CDs (which offer a consistent rate) and step up CDs (which increase the APY after a certain time) to no penalty CDs (which don’t charge early withdrawal penalties). Offerings depend on the bank.

Best for: Earning a consistent interest rate on long-term savings goals

Pros

• May earn a higher interest rate than a traditional savings account
• Earns a consistent APY, depending on the type of CD

Cons

• May not be able to withdraw early without a penalty
• If rates go up after your term starts, you may not benefit

Business bank accounts

Business bank accounts are designed to accommodate business needs. There are many different types of business bank accounts, including business checking and savings accounts, as well as business MMAs and CDs. Business bank accounts often provide features tailored to businesses. For example, a business checking account may offer debit cards for employees or free wire transfers.

Business bank accounts can provide a convenient way to separate business and personal finances.

Joint accounts

Joint bank accounts let you share account ownership with another person. Each account owner has equal access to the account. For instance, you and your partner or child may have a joint checking or savings account. Apart from allowing multiple account holders, these accounts are typically the same as their single-ownership counterparts.

Choosing a bank account

The right type of bank account can make a big difference for your finances. There are several factors to consider when choosing a new bank account, such as:

• APY: The higher the APY, the more interest you’ll earn.
• Accessibility: Some accounts may limit transfers and withdrawals. That may be a dealbreaker if you need regular access to that money.
• Account features: Accounts may be designed to cater to the needs of business owners or offer conveniences like a debit card.
• Requirements and fees: To qualify for some bank accounts, you may have to maintain a minimum balance or meet an opening deposit requirement. Fees can also vary.
• How you plan to use it: If you want an easy way to pay your bills, a checking account is the way to go. If you want to earn interest on your money, consider a CD, MMA, savings account or HYSA.

Opening several types of bank accounts can help you reach different types of goals, too. For instance, you may get a checking account to pay bills, an HYSA to store your emergency fund and an MMA to save for a down payment on a house.

Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.

To send or receive money with Zelle^® both parties must have an eligible checking or savings account. Transactions between enrolled users typically occur in minutes. Terms, conditions, and restrictions apply. For the protection of your account, Zelle^® should only be used to send money to those you know and trust. Neither Citibank nor Zelle^® offers purchase protection for payments made with Zelle^® – for example, if you do not receive the item you paid for or the item is not as described or as you expected.

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