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Types of Savings Account

So you’ve decided that you’ll need to start a savings account. Whether it’s for a vacation, a home renovation, or an emergency fund, you’ll require an account that is ideal for your goals. What are the different types of savings accounts available?

Fortunately, there are many saving options available to you. The types of savings account range from basic savings, high interest, money market, and other specialty accounts. Each account will have its advantages and disadvantages. 

In this article, we’ll go through various types of savings account to help you decide which option is most suitable for your needs. 

High interest savings accounts

As the name implies, high interest or high yield savings accounts offer higher interest rates than your basic savings accounts. Where typical interest rates on basic savings accounts are 0.09%, high interest accounts can range from 1-1.35%. 

Obviously, higher interest rates are more attractive as it facilitates growth much quicker. For example, a balance of $10,000 in a traditional savings account at an interest rate of 0.09% will result in a mere $9 gain after a year (monthly compounding). In contrast, the same $10,000 balance inside a high interest account at a rate of 1.35% will result in a $135 increase at the end of the year.

The catch with the higher rates is the requirement to maintain a minimum balance or even paying fees associated with the account. You must be aware of these caveats, fees in particular, as they can quickly eat away at any interest you gain. Some high interest savings accounts don’t come with extra fees or balance requirements, so shop around to see what’s out there.  

All high interest savings accounts are insured by the Federal Deposit Insurance Corp. (FDIC). This means the chances of you losing your money due to the failure of your bank is virtually zero. Depositing cash in a high interest savings account is one of the most secure ways to park your money.

Money Market accounts

A money market account is one of the different types of savings account that allows you to stow away money while earning interest. The interest earned is generally higher than your traditional savings account. 

While a money market account is similar to a traditional savings account, there are differences. Beyond the generally higher interest rates, money market accounts may have minimum balances. Some of these minimum balance requirements mandate you to carry at least $1,000 in your account. Jumbo money market accounts require over $100,000 in deposits, but you’ll typically get an even higher interest rate.

Another difference between a money market and your basic savings account is that a money market account allows you to write checks and usually offers an ATM card. The ability to both write checks and withdraw cash from an ATM makes it easy to access your funds whenever you need it. The withdrawal limit of six transactions per statement cycle still applies, though, so make sure you’re under the limit or risk costly penalties.

With the different types of savings vehicles, is a money market account right for you? Like a basic savings account, money market accounts are great for saving for short-term expenses, while having quick access when needed.  

Due to the minimum balance requirement, money market accounts are ideal for those who plan to maintain a larger balance. With that being said, some money market accounts permit a mere $100 balance, so it’s not a hard and fast rule. Shop around to find the best rates and conditions.

Basic Saving accounts

The basic savings account is one of the most common types of savings vehicles available. This type of account often has the least restrictions, featuring no minimum balance requirements and typically free of charge.

Interest rates for the basic savings account are among the lowest out of all the different savings account options available. Average rates are typically well below 1%. However, you can find higher rates if you shop around. 

Along with certain other savings accounts, the basic savings account is one of the most secure types of savings plans available. The FDIC insures up to $250,000 per depositor per institution. This means the government will guarantee up to $250,000 in your savings account (as well as checking, money market, and certificate of deposit) if your bank fails. If you have more than $250,000, you can spread your money over different institutions to insure your excess funds. 

The basic savings account is a suitable choice for those who want to:

  • Build an emergency fund: The FDIC insured account will provide a safe location for your funds. It is also easily accessible when you need it the most.
  • Savings goals: Whether it’s for a down payment for a home or a two-week beach vacation, open up a savings account so that you can track your savings goals.
  • Starting to save: A basic savings account is ideal for those who are just starting to save. Since most basic savings accounts don’t require a minimum balance, you can start saving with as little as $20.

Certificate of Deposit (CD)

The certificate of deposit (CD) is another one of the many examples of savings accounts that offer higher interest rates than your standard savings accounts. Like a traditional savings account, a CD is a safe way to store money while earning interest. 

A CD comprises of the following elements:

  • Interest rate: CDs offer fixed-rate payments over the length of the specified term. These rates are dependent on how long the terms are and how large your deposits are. The longer the term and the larger the deposit, the better your rates.
  • Term length: The length of term is how long you agree to lend your money to the bank. During this term, you will have no access to your funds until the CD reaches maturity. Banks offer different term lengths, but standard lengths include 6-month, 1-year, all the way to 5-year CDs. 
  • Principal: This is the amount you deposit into a CD. As mentioned, you won’t have access to this principal during the term of the CD.

CDs are types of savings products that offer higher interest rates but are less liquid. The term length locks you in for a specified amount of time, not allowing any access to your funds without having to pay significant penalties.

Because of the illiquidity of CDs, you’ll need to be certain you can live without access to the funds for the length of the term. For example, using CDs for an emergency fund might be risky as you’ll never know when an emergency might occur. 

If you can live without access to the funds for the agreed-upon term length, CDs are a great way to earn higher interest.

Specialty accounts

Outside your traditional savings accounts, specialty accounts exist to serve a variety of purposes. Consider the following specialty accounts to see if they are suitable for you.

Student accounts

Certain banks offer special savings accounts for high school or college students. By offering low minimum balance requirements or scrapping fees, banks are promoting healthy saving habits at an early age. The less stringent requirements also help when students are struggling with big expenses such as loan payments, books, housing, food, and more.  

Individual retirement arrangements (IRAs)

An IRA is a type of retirement savings account that allows you to hold several different financial products. These products can include stocks, bonds, ETFs, and mutual funds. 

Since the purpose of an IRA is meant for retirement savings, short-term access to the funds is not ideal. In fact, there is a 10% withdrawal penalty if you take out money before you turn 60.

Health savings accounts (HSAs)

Grow your savings tax-free with an HSA account. All contributions made to an HSA are tax-deductible. Withdrawals are also tax-free so long as it is to pay for medical expenses. The drawback of this account is that health plans require you to pay a high deductible.


Bonds are a type of investment vehicle that offers a fixed-rate interest over a certain length of time. Bonds are issued either by the US government or by corporations. When you purchase a bond from the government or corporations, it essentially means you are lending money to them.

The terms for bonds are fixed-term, which means you won’t have access to your money until the term ends. Term lengths vary but typically range from 15 to 30 years. Unlike a CD, you’re allowed to sell a bond before it matures.

Interest rates vary depending on the type of bonds. US treasury bonds offer interest rates of 2-3% – quite a bit higher than the basic savings account. These rates are comparable to what you would see with CD rates.

US government-issued bonds are extremely safe and secure. Since they are issued directly by the government, the chances of you losing your money is virtually zero. Company issued bonds, on the other hand, are riskier. If a company goes out of business, your investment may disappear.

Due to the stable nature of government bonds, utilizing them in a portfolio consisting of other higher-risk financial products like stocks would be ideal. Bonds help guard from the fluctuating markets, putting your mind at ease when markets are down. They also provide a stable source of income, normally through bi-annual interest payments.


As you can see, the types of savings account vary widely. Whether it’s a basic savings account or one of the many specialty accounts, ensure you understand the terms and conditions before opening an account. Each banking institution is unique and may differ in their rates and offerings.

At CreditAssociates we have a special team of experts to help you break the debt cycle, and start saving. Contact us today and we’ll provide you the tools and knowledge to secure your financial future.