By Aniket Bose. Edited by Arjun Chandraeskar.


Bank accounts offer their consumers the guarantee of security, safety, and convenience for their money. Whether the consumer prefers to do online banking or go to a traditional bank, there are several account options for them to choose from. Each bank account has its purpose and can fulfill the consumer’s needs depending on the features the consumer wants in their account. Some accounts let you spend or pay bills, while others are suited for short-term and long-term savings. However, there are 4 main types of bank accounts: Checking accounts, Savings accounts, Money market accounts (MMAs), and Certificate of Deposit accounts (CDs). Let’s go over each one in more detail!

Checking Accounts

A checking account is a deposit account that is held at financial institutions allowing its users to make withdrawals and deposits. They are also known as demand accounts or transitional accounts. Checking accounts are very liquid compared to other accounts and can be accessed through checks, automated teller machines, electronic debits, etc. A checking account is different from various other accounts a bank offers because often they allow numerous withdrawals and unlimited deposits, whereas other accounts may limit their users from both withdrawing and depositing. Consumers can set up their checking accounts at bank branches or online. For account holders to deposit funds, they can use services such as ATMs, direct deposits, and over-the-counter deposits. For consumers to have access to their funds, they can write checks, use ATMs, or even use electronic debit and credit cards connected to their checking account. There have been advances in electronic banking which has allowed checking accounts to be much more convenient for consumers to use. 

Savings Accounts

A savings account is a deposit account that earns interest over time held at a financial institution or a bank. Although savings accounts pay back the account holder very little interest rates, their safety and dependability make for a great bank account for anyone looking to store their cash for their short-term needs. However, these accounts do have limitations such as how often the consumer can withdraw from their account. At the same time, they are considered to be ideal bank accounts for anyone wanting to create an emergency fund. The interest that a consumer earns in their savings account can be considered as taxable income. Since savings accounts are vital sources of funds that banks can use to lend to others when they are seeking a loan; there are savings accounts in almost every single bank and financial institution. It is important to know the rules of your particular savings account because some banks will require you to have a minimum balance to avoid any fees, while other banks will not require you to maintain any balance. The interest rate that the consumer will earn on their savings account will vary depending on the bank that the consumer decides to open their savings account in. 

Money Market Accounts (MMAs)

A money market account is often confused with a money market mutual fund, but it essentially is an interest-bearing account located at banks and financial institutions. Money market accounts are mostly used by people because they possess certain features that are not available in other bank accounts. The majority of money market accounts pay their consumers higher interest rates compared to regular savings accounts. They also allow consumers to write checks, privileges with debit cards, however, they also have restraints that make money market accounts less manageable than a regular checking account. Most banks and credit unions will typically require the consumer to deposit an exact amount of money for opening a money market account and for keeping their account above a specific level. If the balance in the money market account falls below a certain level, then the bank will charge monthly fees to the consumer until they have the required amount of money in their account. The Federal Deposit Insurance Corporation (FDIC), which is an independent agency of the federal government, ensures money market accounts that are issued by banks, so consumers are assured that their money is safe. 

Certificate of Deposit Accounts (CDs) 

A certificate of deposit account is a special type of savings account. The consumer deposits their money into the account and signs an agreement with the bank that they will not make any withdrawals for a specific amount of time (written in agreement). Once that time period has finished, the consumer gets the money that they deposited in the account along with the amount of interest earned. Traditionally, a certificate of deposit accounts works as a time-bound deposit bank account. This type of account is beneficial to banks because they can use the money of various people to earn more money, like extending long-term loans to other consumers. One key thing to note about certificate of deposit accounts is that they do not allow the consumer to deposit any money after their initial deposit. The main disadvantage of a certificate of deposit account is that if the consumer decides to remove their money from the account before their time period is up, the consumer will be penalized by the bank for violating the written agreement. 


Overall, there are various types of bank accounts that are offered at banks, credit unions, and financial institutions — and each account has its unique benefits and flaws. Many people think that there are only two types of bank accounts — checking and savings accounts — but there are a lot more that people across the world haven’t ever heard of. Each bank account serves different needs, which is why a lot of people have multiple bank accounts at multiple banks. It is highly advised that people choose the best type of bank account for themselves; the one that will help them achieve their financial goals. The best way to maximize the return from your bank, reduce fees, keep your money safe, and manage your money easily is by opening a bank account! 

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