The two main types of bank accounts are deposit accounts and non-deposit accounts.

Deposit accounts allow you to add money to or withdraw money from your account at any time. Examples of deposit accounts are checking, savings, and money market accounts.

Checking Account A checking account, also known as a payment account, is the most common type of bank account. It’s a real workhorse that allows you to make purchases or pay bills using paper checks, a debit or check card, online bill pay, automatic transfer, or cash withdrawal from an automatic teller machine (ATM). The institution keeps a record of your deposits and withdrawals and sends you a monthly account statement. The best checking accounts offer no fees, no minimum balance requirement, and free checks.

Savings Account A savings account is a safe place to keep money, and it earns you interest. It doesn’t give you as much flexibility or access to your money as a checking account. While there’s typically no limit on the number of deposits you can make into a savings account, you can only make up to six withdrawals or transfers per month. Savings accounts typically don’t come with paper checks, but they may offer a debit or ATM card that you can use a maximum of three times per month.

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If your balance dips below a certain amount, you may be charged a monthly fee. The institution keeps a record of your transactions and sends you a monthly account statement.

Savings accounts are perfect for your short-term savings goals, like a down payment on a car or holiday gift-giving. Interest rates on savings accounts vary, so it’s important to shop around locally or online for the highest offers. Interest rates on savings accounts are variable, which means they’re subject to change and can decrease after you open an account. (You’ll learn more about compounded interest in Part 2 of this handbook.)

Money Market Account (MMA) A money market account has features of both a savings and a checking account. You can make up to six withdrawals or transfers per month, including payments by check, debit card, and online bill pay. You’re paid relatively high interest rates, especially if you maintain a high minimum balance, such as $5,000 or more.

Money market accounts are a great choice when you start to accumulate more savings. Interest rates vary and are subject to change, so always do your research to find the best money market account offer.

There are also special types of deposit accounts known as time deposits, where you’re restricted from withdrawing your money for a certain period of time.

Certificate of Deposit (CD) A certificate of deposit is a time deposit that requires you to give up the use of your money for a fixed term or period of time, such as 3 months, 12 months, or 5 years. In exchange for this restricted access, banks typically pay higher interest rates than for savings or money market accounts (where you can withdraw money on demand). In general, the longer the term of the CD, the higher the interest rate you receive.

For instance, a six-month CD might pay 1% interest and a five-year CD might pay 3.5%. If you take money out of a CD before the end of the term, or maturity date, you generally have to pay a penalty. So before putting money in a CD, be sure that you won’t need it until after the maturity date and that you understand all the charges and fees associated with early withdrawals.

Many banks offer non-deposit accounts that can be investments, such as stocks, bonds, or mutual funds. It’s important to remember that non-deposit products are never insured by the FDIC or NCUA and may lose some or all of their value.