Different Types of Bank Accounts and How to Utilize Each

In money and banking, there are many different types of bank accounts available to consumers and for good reason, each account serves a different purpose. There are checking accounts, saving accounts, high yield saving accounts (otherwise known as HYSAs) and then other financial instruments like CDs. As each has its use cases, each also has its own associated benefits and drawbacks.

Checking Accounts

For many consumers checking accounts will be a multi-use financial instrument and the main hub for most of your financial activity. Most of your bill payments will come from a checking account. The checking account is primary instrument for paying bills, setting up ACHs, Zelling money to friends and family and it is most often associated with being the account that gets used the most. Although funds in a checking account still accrue interest, very few consumers keep their money in a checking for that purpose. More often than not, money in a checking account is flowing in and out.

Saving Accounts

Savings accounts are mainly for the purpose of exactly that; saving. Most consumers who utilized savings account do so with the sole purpose of saving money and earning a yield. Although much of that money is not transactable while being used to accrue interest, you can make withdrawals on savings accounts like any other bank account.

High Yield Savings Accounts

High yield savings accounts—otherwise known as HYSAs—can be a valuable tool for many consumers looking to maximize yield with their bank savings account. However, there are many associated pros and cons of using a high yield savings account. For one you are limited in your withdrawals and how long it’ll take to receive those withdrawals. Some banks limit consumers in how many withdrawals they can make per year and how long each withdrawal can take.

Credit Unions

Credit unions are typically smaller mom and pap credit unions that are non-profit organizations. These nonprofit organizations typically offer competitive yields to consumers looking to save with them. They are not as big as some of the more traditional household names like Chase and Citibank so they might not have as many offerings as larger banks but they are able to more closely compete in a lot of other areas.

Big Banks

Although this term can be loosely defined big banks typically are considered to be companies like Bank of America, JPM Chase, Wells Fargo, Citibank, etc. and other of the major banking conglomerates with very large market capitalizations. These banks have typically consolidated with smaller banks in the past and were considered too big to fail during the great recession. Some of the banks have trillions of dollars under management and profit greatly for all the deposits they hold for their customers.

Banking is big business and it helps knowing which accounts serve your purpose. Like anything else you don’t want to go overboard with how many different accounts you have open. Understanding the purpose of each account can help you fewer accounts and make your financial situation somewhat simpler if only by a little bit.