4 Must-Know Types of Bank Accounts in 2023

Who should open one: Those who want to save money for a specific goal or have a place to keep extra money

A savings account is a type of bank account that helps you save money and earn interest on your deposit. When you open a savings account, you deposit money into the account and earn a small amount of interest on that balance over time (although the interest earned depends on the financial institution). 

A standard savings account is similar to a checking account, except you wouldn’t use it to make everyday transactions. Instead, it’s an ideal place to store funds you don’t plan on spending soon. 

Unlike checking accounts, most savings accounts don’t include a debit card. Similarly, savings accounts usually have withdrawal limits and minimum balance requirements as an incentive to avoid spending the funds. 

Here are some key features of a savings account: 

• Deposits and withdrawals: You can make deposits and withdrawals from your savings account, although there are usually limits on the number of withdrawals you can make each month without incurring fees. 
• Minimum balance requirements: Some savings accounts require a minimum balance to avoid fees or earn higher interest rates.
• Interest rates:  Savings accounts offer interest rates that are typically higher than checking accounts but are also quite small. If you open a high-yield savings account, you can earn more money on the balance you keep in your account over time. 
• No debit card: Unlike checking accounts, savings accounts typically do not come with a debit card, as they aren’t for everyday spending. 

Overall, savings accounts are the perfect partner to a checking account, as they can help you build an emergency fund or work toward a savings goal, like a car down payment.

How to choose the right savings account

When deciding on the right savings account, consider whether you prefer to open one through a traditional bank or an online financial institution. 

Then, consider the following to find the right savings account for your needs:

• Interest rate: While savings account interest rates don’t amount to much, you can still shop around for an account with the most competitive rate. 
• Minimum balance requirements: Make sure you meet any minimum balance requirements for the account you’re considering. 
• Access to funds: Consider how easily you can access your funds and your preferred access method. Different accounts may offer different access levels through online transfers, ATM withdrawals, or visits to a branch.
• Extra features:  Some savings accounts may offer extra features like budgeting tools, mobile banking, or linked checking accounts, so compare what different accounts offer. 

Online banks tend to offer higher interest rates on savings accounts and may have fewer fees, but you may miss out on the convenience of having a physical branch to visit. Traditional banks offer more in-person customer support and access to additional financial products but are more likely to come with monthly fees. 

Also consider the interest rate and any associated fees. Look for a savings account that offers a competitive interest rate and low or no fees. 

Think about the purpose of the account and what features you need. If you’re saving for something and want to keep the money separate from your other accounts, look for a savings account that allows you to create and label sub-accounts. Or, if you want to be able to access your money quickly in case of an emergency, look for a savings account that offers instant online transfers.