Which Type of Savings Account is Right for You?

Saving money is a big part of reaching your financial goals. So, it’s a smart move to know about the different types of savings accounts and their benefits. In 2022, the average amount of personal savings dropped by 15%.¹ It’s important to consider taking advantage of all the savings account options available. Because, when you work so hard for your savings, you need a savings account that will work for you.

We’ve put together the key info you need to help decide which types of savings accounts are the best fit.

6 types of savings accounts

When choosing a savings account, it’s important to weigh their properties against your particular financial goals, your day-to-day money habits and your unique style of saving. The following savings accounts are sometimes lumped together with checking accounts under the general term "deposit products." Only certain kinds of financial institutions such as banks, credit unions and securities brokers and dealers can offer deposit products.

1. Traditional savings account
As one of the most common and flexible options for saving money, traditional savings accounts can be useful for day-to-day or long-term financial planning. Available at most banks and credit unions, these accounts typically offer a low interest rate but low opening costs and more flexibility than other types of savings accounts.² If you need to withdraw money, you can make up to six transactions per month before the bank or lending institution is allowed to charge you fees. You can also convert it to a checking account, link it to your checking account or close the account altogether whenever you like.³

2. Money market account
Money market accounts are similar to traditional savings accounts but vary in a few ways. For example, both types of savings accounts provide access to your funds, but money market accounts allow you to use checks and debit cards. This can be especially useful if you plan to use the account for an emergency fund. Interest rates are typically higher with money market accounts because they are actually a type of investment account that puts money into very low-risk, very short-term investments. While they tend to pay off better, they also have higher opening and minimum balance requirements than other types of savings accounts.⁴

3. Certificates of Deposit (CDs)
Certificates of Deposit offer a different approach to saving money. Instead of an account format, CDs are a one-time deposit in the form of a promissory note (essentially an IOU). How much you put in and how long it stays there are up to you, but CDs with more money and longer terms could have higher interest rates.⁵ Once the length of the CD is over (called the “maturity date”), you can withdraw the entire principal balance and the interest it earned. If you choose to withdraw money before the maturity date, you will have an early withdrawal penalty. Among different types of savings accounts, this option is more like an investment than an account.

4. Online savings account
Although some lenders offer free online access to a standard savings account, online-only banks conduct 100% of their business through their website or mobile app. These types of savings accounts may turn off customers who prefer banking at a physical branch, but the lack of operating costs is what allows online-only banks to potentially offer higher interest rates.⁶ Also, the websites are often more advanced, which could be an incentive for customers who prefer doing business online.

5. High-yield savings account
Most high-yield savings accounts are offered by online-only banks, so they will come with the pros and cons of those types of savings accounts. However, they potentially offer up to ten times higher than a traditional savings account (called a “yield”). For example, interest rates are currently around 1% for high-yield savings accounts, while it’s around .13% for traditional savings accounts.⁷ Those higher interest rates are possible in part because online-only banks aren’t typically spending money on the operation of brick-and-mortar branches.

6. Cash management accounts
Cash management accounts combine features from checking and savings accounts. They’re typically available through financial companies other than banks. For example, if you invest through Fidelity, you can keep an accessible cash account in the same place as your investments. Your money is still insured by the FDIC, and you can withdraw money via debit card, check or ATM. These types of accounts offer standard or slightly higher interest rates than brick-and-mortar banks, but not as high as high-yield accounts.⁸

Type	Pros	Cons
Traditional Saving Account	Low or no cost to open Up to six transactions per month with no penalty Potential to connect directly with checking account	Low interest rates Potential for monthly fees Often have minimum balance requirements
Money Market Account	Higher interest rates Access to funds via check and debit card Up to six transactions per month with no penalty	Higher opening and minimum balance requirements Monthly fees Interest rate fluctuation
Certificates of Deposit (CDs)	Fixed rates for a fixed term Low risk investment Up to seven CD options to choose from	Money is hard to access Early withdrawal penalty Interest may not keep up with rate of inflation9
Online Savings Account	Higher interest rates Low fees 24/7 access to account	No physical branches Limitations on making deposits
High-Yield Savings Accounts	Highest interest rates Low fees Interest compounds daily	Typically no physical branches Must transfer money to checking to withdraw
Cash Management Accounts	Easy withdraws with debit card, ATM card or checks Keeps cash account in same place as investments No limits on withdrawals	Lower interest rates than online-only banks Typically no physical branches

How to choose a savings account

When evaluating your savings account options, think about how and when you usually need to access your money. Also, try to rank your priorities. Do you value high interest rates over convenience, for example?

Convenience.
Money market accounts are savings accounts that allow you to use checks and debit cards and probably provide the easiest access to your money. They are usually offered by traditional banks with both online and in-person branches. However, they have high minimum balances compared to other types of savings accounts.

High Interest.
Certificates of Deposit generally provide the highest return on your savings. However, you can’t withdraw your money until it reaches maturity, or you’ll be fined and your gains will be lost. High-yield savings accounts are the next type of savings account with the highest interest rates.

Low fees and minimums.
Many online-only savings accounts offer no fees or very low fees. They also don't typically have minimum balance requirements. Traditional savings accounts also may offer low to no fees or balance minimums.

The choice is yours

Where you put your hard-earned money is up to you, and you have options. One of the biggest variables in different types of savings accounts is how you’re able to access your money, so you’ll want to make sure those methods work with the way you live. Different interest rates could help boost your savings slightly, but keep in mind that savings accounts generally have lower return rates compared to investment accounts. Good luck and happy saving!

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This article has been updated from a previous posting on June 5, 2017. Matt Diehl contributed.

1. "Americans now have an average of $9,000 less in savings ... - CNBC." 21 May. 2022, https://www.cnbc.com/2022/05/21/americans-now-have-an-average-of-9000-dollars-less-in-savings-than-in-2021.html. Accessed 22 Aug. 2022.
2. "Savings Accounts Explained: How They Work - Investopedia." https://www.investopedia.com/terms/s/savingsaccount.asp. Accessed 26 Sep. 2022.Murakami-Fester, Amber. “Savings Account Withdrawal Limits? Blame Reg D.” Nerdwallet.com. https://www.nerdwallet.com/blog/banking/how-regulation-d-affects-your-savings-withdrawals/ (accessed May 19, 2017).
3. Murakami-Fester, Amber. “Savings Account Withdrawal Limits? Blame Reg D.” Nerdwallet.com. https://www.nerdwallet.com/blog/banking/how-regulation-d-affects-your-savings-withdrawals/ (accessed May 19, 2017).
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7. "High-yield savings account APY could surge to a 13-year high - CNBC." 2 Sep. 2022, https://www.cnbc.com/2022/09/02/high-yield-savings-account-apy-could-surge-to-a-13-year-high.html. Accessed 26 Sep. 2022.
8. "Best Cash Management Accounts In September 2022 - Bankrate." 1 Sep. 2022, https://www.bankrate.com/investing/best-cash-management-accounts/. Accessed 26 Sep. 2022.