Types of Accounts

Banks offer several ways for you to save your money. Each account has different features and restrictions.

Savings Accounts It's a good idea to use a savings account for savings that you may need to use within a short period of time. When you deposit money in a savings account, your bank or credit union will record deposits, withdrawals, fees, and any interest earned by your account. The interest rate is the rate of interest an account will earn on funds deposited for a full year.

Money Market Accounts A money market deposit account (MMDA) will let you save and write a limited number of checks. It usually earns higher interest than a savings account, but also usually requires a higher minimum balance and has more fees. MMDAs have a variable interest rate, which can be a benefit or a drawback depending on whether rates move up or down.

Time Deposits A time deposit, such as a certificate of deposit (CD), offers a guaranteed interest rate for a fixed period of time. In general, the longer the term, the higher the interest rate. Most banks will charge you a high penalty fee if you withdraw from the CD account before the term expires, or “matures.” Open a CD account only if you think you won't need access to that money during the term of the CD.