Savings
Savings accounts are often the first official bank account held by consumers. Children may open an account with a parent to begin a pattern of saving. Teenagers open accounts to stash cash earned from a first job or household chores. The majority of Americans use a savings account to park emergency cash. Opening a savings account also serves as a way to establish a working relationship with a financial institution.Good For: First bank account, kids, adults looking for a place to park savings or extra cash.
Drawbacks: Savings accounts typically yield a low interest rate in comparison to money market accounts and CDs. Typically, they do not come with a debit card for purchases, and the number of withdrawals per month is limited.
- Feed your savings account with an automatic savings plan
Checking
Checking accounts provide the consumer with a basic account to deposit checks, make withdrawals, and pay bills. Paper checks, though slowly losing popularity, are issued from checking accounts. More recently, the debit card (or check card) has taken over as a primary form of payment from checking accounts. Most banks now offer online bill pay services through checking accounts, helping to streamline payments.Good For: Anyone who needs a place to deposit a paycheck or cash and maintains a balance under $5,000, people who enjoy convenience of a check card.
Drawbacks: Checking accounts are subject to a variety of fees, which can become expensive quickly. Many checking accounts charge a maintenance fee or require a minimum balance. Options vary widely from bank to bank.
Money Market
A money market account earns more interest than either a savings or checking account, but combines features of both. For those who tend to carry higher balances in checking accounts, these can be a great option to park cash. The higher rates mean the cash is working for you and earning interest.Good For: People who hold average balances in their account of $5,000 or more and want to earn higher interest rates.
Drawbacks: Most money market accounts have significant minimum balance requirements ranging from $5,000 to $10,000. Interest rates may be low, and fees can still be charged on money market accounts. Withdrawals are often limited to a certain number per month.