5 Types of Bank Accounts Explained

When you opened your first bank account, it was probably a basic checking account. You may have opened a savings account at the same time. But did you know that there are actually five common types of bank accounts offered by financial institutions in the United States?

You may not even think of some as bank accounts, but they’re all offered by banks — or credit unions — and are set up for a variety of purposes, depending on your goals and needs.

Here's how to choose which ones are right for you.

Key points

• This article discusses five types of bank accounts available in the U.S.: checking accounts, savings accounts, money market accounts, certificates of deposit, and individual retirement accounts.
• Each account type serves a different purpose, from managing day-to-day spending to saving for retirement, and each carries its own rules around access, fees, and tax treatment.
• Factors such as interest rates, deposit insurance, minimum balance requirements, and withdrawal penalties vary across account types, so understanding the terms of each can help in choosing the right option for your financial goals.

How many different types of bank accounts are there?

According to the latest FDIC data from 2023, 95.8% of U.S. households had a checking or savings account at a bank or credit union. ^[1] And although checking accounts and savings accounts are the most well-known, there are other types of accounts that banks may support.

5 most common types of bank accounts

1. Checking accounts
2. Savings accounts
3. Money market accounts
4. Certificate of deposit accounts (CD)
5. Individual retirement arrangements or individual retirement accounts (IRA)

1. Checking accounts

Checking accounts can provide you with the quickest, easiest access to your money. Different banks require different minimum deposits to open an account and have varying withdrawal limits, so make yourself familiar with these before opening an account. ^[2]

Also, be sure your account is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), which provide up to $250,000 of protection per depositor. This keeps your money safe if the institution fails.

So, why should you open a checking account?

They’re designed as places to keep your money in the short term, so you can pay bills and conduct transactions easily. With many checking accounts, it’s smart to carry a minimum balance as one way to avoid fees. And yes, banks do charge an array of fees. ^[3]

Types of checking accounts

• Free checking accounts don’t charge a monthly maintenance fee and don’t require a minimum balance. Some institutions may offer free checking accounts to students or those older than 55.
• Interest-bearing checking accounts can let you earn a modest interest rate on your funds. It’s not likely to be more (and will probably be less) than even what you can earn in a savings account, and isn’t likely to keep pace with inflation, either. But if you can avoid fees that offset any interest you may earn, it’s better than nothing.
• Premium checking accounts are for customers who want to keep a large sum of money — often $5,000 to $25,000 — in their account. In exchange for maintaining a higher minimum balance, they can come with perks like free checks, reimbursement of ATM fees.
• Second chance checking accounts are available to some customers who have had previous accounts closed because of a negative factor including negative balance or excessive overdrafts. If you maintain your account in good standing, you may be eligible to switch back to a regular checking account after a given period of time.
• Joint checking accounts are for people who share their finances and expenses, for example married couples or parents with children. Both parties have check-writing privileges, and either one can withdraw as much money as they want. However, it is likely both parties must be present to close the account.
• Trust checking accounts are checking accounts trustees use to pay expenses incurred by a trust or to distribute assets from an estate.
• Student checking accounts give young account-holders a chance to learn the ropes, often by providing free checks and/or waiving minimum balance requirements, ATM fees or other typical expenses.

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Pros of opening a checking account

• Some checking accounts earn interest, allowing balances to grow when funds are not actively in use, though interest rates on checking accounts are typically lower than those on savings accounts.
• Deposits held at most banks are covered by FDIC insurance up to allowable limits.
• Funds may be accessed in multiple ways, including via debit card, ATM, check, or online transfer.
• Direct deposit allows paychecks to be deposited automatically on payday, and some banks offer early direct deposit of up to two days ahead of schedule.
• Checking accounts maintain a record of deposits and transactions, making it possible to monitor spending over time.

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Cons of opening a checking account

• Many checking accounts do not earn interest, and those that do generally offer lower rates than savings accounts.
• Some accounts carry monthly maintenance fees, which reduce the funds available to the account holder.
• Certain banks require a minimum balance to be maintained at all times, with fees applied if that balance is not met.

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2. Savings accounts

Savings accounts allow people to, well, save. They’re all about putting money aside for future use, and parents may open joint savings accounts for their kids to show them how to save. They’re a good way to accumulate cash for large purchases or save for emergencies.

Pros of opening a savings account

• Funds are accessible at any time, and accounts can typically be linked to a checking account to automate deposits and transfers.
• Money held in a savings account earns interest, with high-yield savings accounts generally offering higher annual percentage yields (APYs) than traditional savings accounts.
• Deposits are federally insured up to $250,000 per depositor, per institution, and per account ownership category through the FDIC or NCUA.
• Many savings accounts can be opened with little or no initial deposit, particularly at online-only banks.

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Cons of opening a savings account

• Interest rates are variable and may fall if the federal funds rate drops, affecting the rate at which savings grow.
• Some accounts require a minimum balance to avoid maintenance fees, and tiered accounts may offer lower APYs to those who cannot maintain higher balances.
• Fees — including charges for wire transfers, out-of-network ATM use, excess withdrawals, and account inactivity — can offset interest earned.
• If the APY does not keep pace with inflation, the purchasing power of funds held in the account will decrease over time, making savings accounts better suited to short-term goals than long-term ones.
• Interest earned in a savings account is subject to income tax.

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3. Money market accounts

Money market accounts (MMAs) are another type of account offered by banks and credit unions. They can offer higher interest rates when compared with a traditional savings account.

Pros of opening a money market account

• Money market accounts earn interest, with the average rate standing at 0.45% APY as of June 2, 2026, according to Bankrate data, though top-rate accounts offer 4% APY or more.
• Funds can be accessed without penalties — many accounts include debit card access and ATM withdrawals, making money market accounts more flexible than certificates of deposit or other time-restricted savings products.
• Deposits held at federally insured institutions are protected up to $250,000 per depositor and per account ownership type through the FDIC or NCUA.
• Unlike most savings accounts, many money market accounts offer check-writing privileges, which can be useful for paying large expenses directly from the account.

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Cons of opening a money market account

• While some accounts can be opened with no minimum deposit, earning the highest advertised rates may require a balance of $25,000 or more, and some institutions set the threshold at $100,000 or above.
• Monthly maintenance fees, which can range from $10 to $25, may offset interest earned, particularly on smaller balances, though some accounts allow fees to be waived by meeting the balance or direct deposit requirements.
• High-yield savings accounts may offer comparable or higher interest rates without requiring high minimum balances, while CDs may offer higher guaranteed yields, though at the cost of locking up funds for a set term.

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4. Certificate of deposit (CD) accounts

A certificate of deposit (CD) is a deposit account available at banks and credit unions that pays a fixed interest rate in exchange for leaving funds in the account for a set period of time, known as the term. CD terms typically range from three months to five years, though some options run as short as one month or as long as 10 years.
Unlike savings or checking accounts, funds deposited in a CD cannot generally be withdrawn before the term ends without incurring an early withdrawal penalty, which can reduce interest earned and may affect the principal. At federally insured institutions, deposits are protected up to $250,000 per depositor, per institution, and per account ownership category through the FDIC or NCUA.

Because CD holders commit their funds for a fixed term, banks may offer higher yields than those available on more flexible savings accounts. The interest rate is locked in at the time of opening, meaning it will not change for the duration of the term, regardless of broader movements in interest rates. ^[8]

Pros of opening a certificate of deposit account

• Fixed-rate CDs deliver a guaranteed APY for the full length of the term, meaning the rate will not decrease even if broader interest rates fall during that period.
• Deposits held in CDs at federally insured banks and credit unions are backed up to $250,000 per depositor, per institution, and per account ownership category through the FDIC or NCUA. The FDIC notes that no depositor has ever lost funds in a CD it insures.
• Because CD holders cannot withdraw funds without a penalty, banks may offer higher yields on CDs than on more liquid savings accounts.
• CDs are available in a wide range of terms and account types, including no-penalty CDs, step-up and bump-up CDs, and add-on CDs, giving depositors options depending on their goals and need for flexibility.

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Cons of opening a certificate of deposit account

• Withdrawing funds before the term ends typically results in a penalty that can reduce interest earned and may affect the principal.
• Locking in a fixed rate carries interest rate risk; if rates rise after the CD is opened, the depositor will miss out on higher yields available on new accounts.
• If inflation rises above the CD's APY, the purchasing power of funds held in the account will decline over time.
• CD yields are generally lower than returns available from higher-risk investments such as stocks and exchange-traded funds (ETFs), making them less suited to long-term goals such as retirement saving.

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Are money market accounts and certificates of deposit accounts safe?

CDs, which are held by a bank or credit union, are insured by the FDIC and, therefore, safe up to $250,000. A money market deposit account is also insured by the FDIC, just like a savings or checking account.

However, a money market mutual fund is not. These are different from MMAs, though the name is somewhat similar. Money market mutual funds aren’t FDIC-insured accounts — they’re funds that invest in bonds, Treasury bills, and/or short-term CDs that pay out earnings from those investments rather than by the financial institution where you’ve deposited your funds.^[9]

5. Individual retirement accounts (IRA)

Individual retirement accounts (or arrangements), also known as IRAs, are another type of account where you can put your money, specifically for retirement. You can invest in an IRA through your bank or credit union, but they’re also available through stockbrokers, life insurance companies, and mutual funds. ^[10]

Pros of IRAs

• IRAs offer tax-advantaged growth. Contributions to a traditional IRA may be tax-deductible, while a Roth IRA allows investment earnings to be withdrawn tax-free in retirement.
• Unlike a 401(k), which can limit account holders to a set menu of investments chosen by the employer, an IRA allows the holder to invest in a broader range of assets, including stocks, bonds, funds, and CDs, depending on what the broker offers.
• Roth IRAs are not subject to required minimum distributions (RMDs), meaning account holders are not required to begin withdrawing funds at a certain age.

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Cons of IRAs

• Annual contribution limits are relatively low. In 2026, the limit for both traditional and Roth IRAs is $7,500 ($8,600 for those aged 50 and older).
• Withdrawing funds from most IRAs before age 59½ typically results in income taxes on the amount withdrawn plus a 10% penalty, with limited exceptions.
• Traditional IRA holders are required to begin taking minimum distributions at age 73, or face a penalty.

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The bottom line

Financial institutions offer a variety of account options depending on your situation and goals. From students starting out to workers saving for a vacation, from professionals planning for retirement to investors wanting to explore the stock market, there are options available for just about everyone.

Some options offer more flexibility than others. Some offer more high-yield options. Some offer more security. There are tax advantages to some, and these may act as a down payment on your future, but on the flip side, they may carry an early withdrawal penalty.

Whatever decision you make, it pays to read the fine print and make an informed decision.

Sources

1. FDIC, “FDIC Survey Finds 96% of U.S. Households Were Banked in 2023” https://www.fdic.gov/news/press-releases/2024/fdic-survey-finds-96-percent-us-households-were-banked-2023 Accessed June 5, 2026
2. FDIC, “Understanding Deposit Insurance” https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance Accessed June 5, 2026
3. Bank of America, “8 Common Banking Fees” https://bettermoneyhabits.bankofamerica.com/en/personal-banking/avoid-bank-fees Accessed June 5, 2026
4. Bankrate, “13 Types of Checking Accounts” https://www.bankrate.com/banking/checking/types-of-checking-accounts/ Accessed June 5, 2026
5. Capital One, “Checking Accounts: Advantages and Disadvantages” https://www.capitalone.com/bank/money-management/banking-basics/benefits-of-checking-accounts/ Accessed June 5, 2026
6. Experian, “Pros and Cons of Savings Accounts” https://www.experian.com/blogs/ask-experian/pros-and-cons-of-savings-accounts/ Accessed June 5, 2026
7. Bankrate, “Pros and Cons of Money Market Accounts” https://www.bankrate.com/banking/mma/money-market-account-advantages-and-disadvantages/ Accessed June 5, 2026
8. Bankrate, “Pros and Cons of CD Investing” https://www.bankrate.com/banking/cds/the-pros-and-cons-of-cd-investing/ Accessed June 5, 2026
9. Fidelity, “Money Market Fund Vs CD” https://www.fidelity.com/learning-center/smart-money/money-market-vs-CD Accessed June 5, 2026
10. IRS, “Individual Retirement Arrangements” https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras Accessed June 5, 2026
11. Bankrate, “What is an IRA?” https://www.bankrate.com/investing/what-is-an-ira Accessed June 5, 2026
12. IRS, “Retirement Topics - IRA Contribution Limits” https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits Accessed June 5, 2026
13. IRS, “Retirement Plans FAQs Regarding Distributions and Withdrawals” https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals Accessed June 5, 2026

About the Author

Becca has over 10 years of experience as a content writer, working across various industries including finance, digital marketing, education, travel, and technology. Her work has been featured in publications including Forbes, Business Insider, AOL, Yahoo, GOBankingRates, and more.