High-Yield and More: 4 Types of Savings Accounts to Consider

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An estimated 71% of Americans have some type of savings account. If you’re thinking about joining them – or are looking for an account that offers better returns – choosing the right kind of savings account matters. Interest rates can vary dramatically, and different accounts may have unique benefits or restrictions.

Fortunately, by learning more about widely used savings accounts, it’s easier to determine which option is best for your needs. Whether you’re like the 32.9% of American adults with $100 or less to save or have already built up solid savings, here’s a look at four types of savings accounts to consider.

Traditional Savings

Traditional savings accounts are the most common version, typically offered by banks and credit unions with physical branches. Generally, the money in these accounts is highly accessible. Along with being able to transfer funds to a checking account, ATM and counter withdrawals are usually possible. Additionally, the balances are traditionally insured for up to $250,000, either through the FDIC or NCUA.

When it comes to drawbacks, the most significant is typically the interest rate. While interest rates vary by bank or credit union, the average is usually substantially lower than what you find with some other types of savings accounts. Additionally, excess withdrawals – generally more than six per month, based on Regulation D – can trigger penalties, including fees or account closures.

High-Yield Savings

High-yield savings accounts are most commonly found in online banks and credit unions that don’t have brick-and-mortar locations. Functionally, they work similarly to traditional savings accounts. However, since the institution has lower operating costs, interest rates are usually higher.

Generally, the funds are FDIC or NCUA insured, so you get the same amount of protection as you find with traditional savings accounts. Fees are usually lower, too, typically for the same reason. Additionally, the money is reasonably accessible, though it usually relies on shifting money to a checking account to get debit card or ATM access. However, there aren’t any branches to make withdrawals, and transfers to other banks or credit unions can take several days to complete.

Money Market

A money market account combines some savings account and checking account features, making it a hybrid-style account. Generally, they’re available through brick-and-mortar and online banks and credit unions. Along with paying interest with rates above most traditional savings accounts, users may be able to write checks or directly access funds from an ATM or when using a connected debit card.

However, withdrawal limits may apply, usually based on Regulation D. Additionally, initial deposit requirements are often higher than they are with traditional or high-yield savings accounts, and monthly maintenance fees are relatively common. Plus, interest rates are usually tiered, meaning you only get the best rate if your balance is high.

Cash Management

The purpose of a cash management account isn’t to serve as a typical savings account. Instead, these function as places to store money that’s intended for purchasing investments in an associated retirement or brokerage account. Generally, these are services available through robo-advisor apps or online brokerages, offering interest rates that are higher than many traditional savings accounts. Some may come with some checking account features, too, such as bill-pay services or the ability to transfer money to other bank accounts.

However, these accounts aren’t always protected by FDIC or NCUA insurance. Additionally, branch-based banking isn’t always available, and the interest rates aren’t guaranteed to exceed what you get with high-yield savings accounts.