A guide to choosing the right account to fit your financial needs
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Fact checked by Brendan HarknessFact checked by Brendan Harkness
If money is a tool you use to get what you want and need, then a bank is like your tool chest. And just like any good tool chest, it’s best to have compartments to sort your tools for different purposes. That’s what the four main types of bank accounts provide. They are:
Checking accountsSavings accountsMoney market accounts (MMAs)Certificate of deposit (CD) accounts
Banks offer many other benefits too, like safety and security, and even help you earn a little bit of extra cash in the form of interest. We’ll go over each of the four main types of bank accounts and how they work so you can understand how to best use them to manage your money.
Key Takeaways
Financial experts recommend having at least a checking and a savings account to handle short-term cash flow and long-term savings.Banks and credit unions vary widely in the features and benefits they offer for each account type, so it pays to shop around for the right institution and accounts.Online banks and credit unions typically charge lower fees and offer higher interest rates on savings accounts—though not always, so shop around before signing up.
All four of the account types mentioned above are eligible for FDIC or NCUA insurance if the providing bank or credit union is a member.
Checking Accounts
Your checking account serves as the main gateway for all of your cash, making it an essential part of your financial toolbox. It’s where you’ll typically receive your paycheck, tax refunds, and other income, along with any other deposits you make. You’ll generally use it to spend money, either by withdrawing cash, writing a check, swiping a debit card, or paying bills.
Checking accounts commonly come with some fees, although the specific types and amounts vary by bank. Here are some things to look for:
ATM fees: Withdrawals at bank-owned and affiliated ATMs are generally free, but if you use an out-of-network ATM, you may have to pay two different fees: a surcharge fee charged by the ATM’s owner and an out-of-network ATM fee from your bank (e.g., $3 for certain Chase accounts). Monthly fees: Many checking accounts charge a monthly fee, often from $5 to $15. This fee can often be waived by meeting certain monthly requirements, such as receiving a certain amount via direct deposit, maintaining a minimum balance, or signing up for electronic statements.Overdraft fees: You may have the option to sign up for overdraft services when you open your account to cover any overspending. If you opt in, you’ll pay a fee for each overdraft charge you make (e.g., $15 for certain Digital FCU accounts), up to a certain number of charges per day.Wire transfer fees: ACH transfers are the standard way to move money digitally since they’re free, but they can take several days. Wire transfers can move money between accounts on the same day but may cost $20 to $50 to send, for example, and $0 to $25 to receive. Paper statement fees: Banks often charge a few bucks each month if you prefer your statements to be mailed to you. Online statements are generally free.Nonsufficient funds (NSF) fees: If you’re not signed up for overdraft services, the bank will reject any transactions for more than your balance, such as when you swipe your debit card at the cash register. It may charge your account each time this happens, though exact fees vary by institution.
In addition to the types of fees, it’s good to know about the different types of checking accounts available. Most banks offer a flagship checking account to suit most people, but they may also offer other types, including:
Free checking: These accounts don’t charge any monthly fees, but they may charge other types of fees depending on how you use them. For example, you may be charged a fee for overdrafting your account or using an out-of-network ATM. Interest checking: Most banks don’t offer interest on checking accounts, but some do. The rate is generally less than you’d earn with a savings account and may come with additional requirements and fees that can be onerous.Student checking: Many banks offer checking accounts for teens and college students with reduced fees and requirements. If you’re under age 17 or 18, you may need to share the account with an adult co-owner.Second-chance checking: If you can’t get approved for a traditional checking account because you had trouble with bank accounts in the past, some banks offer second-chance checking accounts. These may come with higher fees and fewer features, but you may be able to transition to a regular checking account after several months of good use.
Savings Accounts
A savings account makes up the second pillar of most bank account packages. It’s designed as long-term storage for money you’re not using to make immediate purchases. You don’t technically need a savings account, but there are many good reasons to have one. (Credit unions, however, typically require you to keep at least $5 in a savings account in order to keep your membership active.)
Savings accounts offer a small amount of interest to help propel you toward your savings goals, with the rate shifting up and down as the fed funds rate rises and falls. These accounts don’t typically charge a lot of fees, since you generally just transfer money into the account and let it sit there until you need it. But they may charge a few, such as monthly fees if you’re below a minimum balance amount.
Important
Previously, federal rules limited you to just six withdrawals per month from savings accounts. That rule was removed in 2020. However, some banks still opt to keep that limit in place and charge an “excessive withdrawal fee” for going over six per month.
Most of all, savings accounts offer a good way to separate your extra cash from your spending money. If you don’t see it available to use in your checking account, you may be less tempted to spend it.
Many people open several savings accounts for different purposes, such as separate accounts for their emergency fund and general-purpose savings. Some banks, like Ally Bank, even offer “buckets” that let you compartmentalize your savings within the same account.
Most banks offer at least one basic savings account. They may also offer additional types, including:
High-yield savings: You can earn a far higher interest rate with a high-yield account, often beyond what some banks offer on some CDs. In return, they may come with higher minimum deposit requirements. Kids’ savings: Children, teens, and students can often open savings accounts with an adult joint account owner as a sort of training-wheels account to learn to manage their own money. Club savings: A sort of forced savings plan, this type of account lets you deposit money throughout the year. The catch is that you can’t withdraw it except at a specific time, depending on the purpose of the account, such as summer vacations or holiday shopping. A popular example of club savings is a Christmas Club account.
Money Market Accounts (MMAs)
Money market accounts are less common than checking and savings accounts. They’re a sort of hybrid between those two types of bank accounts and typically come with higher minimum deposit requirements. They tend to feature the higher interest rates that savings accounts provide, but also allow you to write a limited number of checks per month (often six or fewer).
For that reason, they’re not a great substitute for a checking account. But if you’re looking for a bit more access to your cash than a savings account provides and also want to earn more interest, a money market account may be a good option.
Warning
A money market account is different from a money market mutual fund, which is actually an investment that isn’t protected by FDIC or NCUA insurance.
Certificate of Deposit Accounts (CDs)
Certificates of deposit, also known as “share certificates” at credit unions, are a type of timed deposit account. You open the account with one deposit that you can’t access until the CD matures at the end of its term length, which is typically between one month and five years (or longer). At the end of the term, you can withdraw the funds penalty-free (plus the accrued interest) or let the CD auto-renew.
Most banks offer their highest interest rates on CDs, especially CDs with longer terms. The only fee involved is an early withdrawal penalty if you withdraw before maturity, which is typically charged as a certain number of days’ worth of interest based on your original term length. For example, if you withdraw the money in a one-year CD early, Capital One may charge you three months’ worth of interest.
A CD is generally a good choice if you want to make sure your money is locked away and earning a good rate, especially when the fed funds rate is dropping or if you know when you’ll need the funds. For example, if you plan to start looking to buy a home in three years, consider a three-year CD. Alternatively, you could consider opening several CDs at once with a staggered “CD ladder” approach, allowing you to earn a great rate while still getting frequent access to your money.
Other Types of Accounts
There are many other types of accounts that banks and other financial institutions frequently offer. These can take the form of investment accounts, tax-advantaged accounts, debts, and other financial tools:
Credit cards: A line of credit attached to a physical card that you can use to make everyday purchases and sometimes earn rewards on your spending. IRAs and 401(k)s: Tax-advantaged retirement accounts that you can open as a savings account or an investment account with a brokerage firm or bank. Your employer generally chooses where your 401(k) is held. Prepaid debit cards: You can load money onto prepaid debit cards and spend it just like you would with a regular debit card tied to a checking account, but only up to the amount on the card. They’re often used as alternatives to traditional checking accounts for people unable to get approved at regular banks, and they may come with high fees.Brokerage accounts: A brokerage account at an investment firm acts as a holding tank for your money as you buy and sell different investments, like stocks, bonds, and crypto.Health savings accounts (HSAs): People with high-deductible healthcare plans may be eligible to open a tax-advantaged HSA at banks and investment firms.Education savings accounts: Coverdell accounts and 529 plans are two examples of education savings accounts that banks sometimes offer, although you can also open them at investment firms.
Frequently Asked Questions (FAQs)
What Kind of Property Is a Bank Account?
A bank account is considered intangible personal property because it’s owned by a person (or multiple people, if it’s a joint account), and it isn’t something you can physically touch, although it does have value.
What Do You Need to Open a Bank Account?
You’ll need to bring documents to prove your identity, such as your driver’s license or passport. You’ll also need to fill out an application and deposit the minimum opening deposit amount (if required).
What Are the Most Common Types of Bank Accounts?
Most banks offer checking and savings accounts, which are the two accounts most financial experts recommend everyone have. Money market accounts and CDs are also very common options.
What Is the Easiest Bank Account to Get?
Second-chance checking accounts are designed to be accessible for people with past banking issues. They may come with steeper fees and fewer features, but you can often upgrade to a regular checking account after you’ve shown you can manage your account well for a period of time.
Are All Bank Accounts Interest-Bearing?
No, not all bank accounts are interest-bearing. Checking accounts generally don’t offer interest unless they’re specifically marketed as an “interest checking account.” However, other types of bank accounts like savings accounts, CDs, and money market accounts generally do always offer interest.
The Bottom Line
Choosing which types of bank accounts to open is a personal decision. Most financial experts recommend that you have at least a checking and a savings account to separate your short-term cash flow from long-term savings—but after that, it’s up to you to choose how many accounts you open and at which banks or credit unions.
Take some time to consider what’s important to you when it comes to banking, such as in-person vs. online service, higher interest rates, lower fees, ATM access, etc. You don’t have to go with the bank down the street from your home, and identifying your priorities in advance can help you get the most from your banking experience.
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A guide to choosing the right account to fit your financial needs
Amazon.com: Its Role in the U.S. Industry
Introduction
Amazon.com, often simply referred to as Amazon, has transformed from an online bookstore into a colossal global conglomerate that has fundamentally altered the landscape of retail, technology, and numerous other industries. Founded in 1994 by Jeff Bezos, Amazon’s rapid growth and diversification have made it a central player in the U.S. economy. Its impact is felt across various sectors, including e-commerce, logistics, cloud computing, entertainment, and even artificial intelligence. This article explores Amazon’s role in the U.S. industry, examining its influence, achievements, and the challenges it faces.
The Rise of Amazon.com
Origins and Early Growth
Amazon began as an online bookstore in Bezos’s garage in Bellevue, Washington. The vision was simple but revolutionary: to create an online platform where people could buy books. Bezos recognized the potential of the internet to disrupt traditional retail and chose books as his starting point due to their wide appeal and ease of distribution. By offering a vast selection and competitive prices, Amazon quickly gained a foothold in the market.
The company’s initial public offering (IPO) in 1997 marked the beginning of its journey toward becoming a dominant player in the U.S. and global markets. Amazon’s early success was driven by its focus on customer satisfaction, an extensive inventory, and a commitment to fast and reliable delivery. This focus laid the foundation for its expansion into other product categories and services.
Diversification and Expansion
Amazon’s diversification strategy began with the introduction of new product categories, such as electronics, toys, and apparel. This move positioned Amazon as a one-stop shop for consumers, significantly expanding its customer base. The company also introduced its marketplace platform, allowing third-party sellers to offer their products alongside Amazon’s own inventory. This not only increased the variety of products available but also created a new revenue stream for the company through commissions on sales.
One of the most significant milestones in Amazon’s diversification was the launch of Amazon Web Services (AWS) in 2006. AWS provided cloud computing services to businesses, enabling them to rent computing power and storage rather than investing in expensive infrastructure. This service quickly became a cornerstone of Amazon’s business, contributing significantly to its profitability and establishing Amazon as a leader in the tech industry.
Amazon’s Role in E-Commerce
Transforming Retail
Amazon’s impact on the retail industry cannot be overstated. It has revolutionized the way consumers shop, shifting much of retail activity from brick-and-mortar stores to online platforms. The convenience of shopping from home, coupled with Amazon’s vast selection and competitive pricing, has led to a fundamental change in consumer behavior. This shift has forced traditional retailers to adapt, leading to the rise of omnichannel strategies that integrate online and offline sales.
The concept of “one-click shopping,” patented by Amazon in 1999, further streamlined the online shopping experience. This innovation reduced the friction in the purchasing process, contributing to higher conversion rates and reinforcing Amazon’s dominance in e-commerce. Additionally, Amazon Prime, launched in 2005, offered customers free two-day shipping and other benefits for an annual fee, further solidifying customer loyalty and increasing the frequency of purchases.
Impact on Small Businesses
While Amazon has provided opportunities for small businesses through its marketplace platform, it has also posed challenges. On the one hand, small businesses gain access to a vast customer base and the logistics infrastructure that Amazon offers. On the other hand, they face intense competition, not only from other third-party sellers but also from Amazon itself. The company’s ability to undercut prices and its control over the marketplace platform have led to concerns about fairness and market power.
Moreover, Amazon’s algorithms and data-driven approach to retail have raised questions about the transparency of how products are promoted and priced on the platform. Small businesses often struggle to achieve visibility without spending on Amazon’s advertising services, which can be costly. Despite these challenges, many small businesses continue to rely on Amazon as a vital sales channel, underscoring its central role in the U.S. retail industry.
Amazon in the Logistics and Supply Chain Industry
Revolutionizing Logistics
Amazon’s impact extends beyond retail into logistics and supply chain management. To fulfill its promise of fast and reliable delivery, Amazon has invested heavily in building a sophisticated logistics network. This network includes a vast network of fulfillment centers, advanced robotics, and a growing fleet of delivery vehicles, including drones.
Amazon’s logistics capabilities have set new standards for the industry. The company has pushed the boundaries of what is possible in terms of speed and efficiency, challenging traditional logistics providers like FedEx and UPS. Amazon’s commitment to customer satisfaction has driven innovations such as same-day and even one-hour delivery in select areas, further raising consumer expectations.
In-House Logistics Services
In recent years, Amazon has taken steps to reduce its reliance on third-party logistics providers by expanding its in-house delivery capabilities. The launch of Amazon Logistics, a service that uses independent contractors to deliver packages, is a testament to this strategy. This move has enabled Amazon to exert greater control over the delivery process and reduce costs.
However, this expansion has not been without controversy. Amazon’s use of independent contractors has sparked debates about labor practices and the gig economy. Critics argue that Amazon’s business model places financial and physical burdens on its delivery drivers, who are often classified as independent contractors rather than employees. This classification exempts Amazon from providing benefits and protections typically afforded to employees, such as health insurance and minimum wage guarantees.
Amazon Web Services: The Backbone of the Internet
Dominating Cloud Computing
Amazon Web Services (AWS) has emerged as one of the most significant contributors to Amazon’s success. As the leading provider of cloud computing services, AWS powers a vast portion of the internet, supporting everything from startups to large enterprises. Its services include computing power, storage, databases, machine learning, and more.
AWS’s dominance in cloud computing has had a profound impact on the tech industry. By providing scalable and cost-effective solutions, AWS has lowered the barriers to entry for new businesses, fostering innovation and entrepreneurship. Companies no longer need to invest heavily in physical infrastructure; instead, they can rent the necessary resources on demand from AWS.
Economic Impact and Innovation
The success of AWS has not only boosted Amazon’s financial performance but also contributed to the broader U.S. economy. AWS has created jobs, driven innovation, and supported the growth of numerous tech companies. Its services have become integral to the operations of many businesses, from streaming services like Netflix to financial institutions and government agencies.
AWS’s role in advancing technologies such as artificial intelligence and machine learning has also been significant. By making these technologies accessible through cloud services, AWS has enabled companies to develop new applications and services that were previously out of reach. This has spurred growth in sectors such as healthcare, finance, and entertainment.
Amazon’s Influence on Entertainment and Media
Amazon Studios and Prime Video
Amazon’s foray into the entertainment industry began with the launch of Amazon Studios and Prime Video. These platforms have become key players in the streaming wars, competing with giants like Netflix, Disney+, and HBO Max. Amazon Studios produces original content, including critically acclaimed series like The Marvelous Mrs. Maisel and The Boys, as well as feature films.
Prime Video, available as part of the Amazon Prime membership, has become a major driver of subscriber growth. By offering a mix of original content and licensed programming, Amazon has been able to attract a diverse audience. The company’s investment in high-quality content has not only boosted its streaming service but also positioned it as a significant player in Hollywood.
Impact on the Publishing Industry
Amazon’s origins as an online bookstore continue to influence the publishing industry. The company has become the largest bookseller in the world, both in physical books and e-books. The Kindle, Amazon’s e-reader, revolutionized the way people consume books, making digital reading mainstream.
However, Amazon’s dominance in the book market has raised concerns among publishers and authors. The company’s pricing strategies and negotiation tactics have led to disputes over revenue sharing and control. Amazon’s influence over the publishing industry extends to self-publishing, where its Kindle Direct Publishing platform allows authors to bypass traditional publishers and reach readers directly. While this has democratized publishing, it has also led to an oversaturation of the market and challenges in quality control.
Challenges and Criticisms
Regulatory Scrutiny
Amazon’s immense size and influence have made it a target for regulatory scrutiny. In the U.S. and abroad, lawmakers and regulators have raised concerns about the company’s market power, labor practices, and treatment of third-party sellers. Antitrust investigations have been launched to determine whether Amazon engages in anti-competitive behavior, such as favoring its own products over those of third-party sellers on its platform.
The company’s expansion into various industries has also led to concerns about its dominance and potential to stifle competition. Critics argue that Amazon’s control over data, logistics, and retail gives it an unfair advantage, making it difficult for smaller companies to compete. In response, there have been calls for greater regulation and even the potential breakup of Amazon into smaller entities.
Labor Practices and Workers’ Rights
Amazon’s labor practices have come under intense scrutiny, particularly in its fulfillment centers and delivery network. Reports of grueling working conditions, high injury rates, and inadequate breaks have sparked widespread criticism. Workers have organized protests and strikes, demanding better pay, safer working conditions, and the right to unionize.
The company’s use of technology to monitor and manage workers has also raised ethical concerns. Amazon’s reliance on algorithms to track productivity and enforce performance targets has been criticized for creating a dehumanizing work environment. The company’s resistance to unionization efforts has further fueled debates about workers’ rights and corporate responsibility.
Environmental Impact
As one of the largest companies in the world, Amazon’s environmental impact is significant. The company’s vast logistics network and rapid delivery services contribute to carbon emissions and packaging waste. Amazon has faced criticism for its role in driving consumerism and its contribution to environmental degradation.
In response, Amazon has pledged to become more sustainable. The company launched the Climate Pledge in 2019, committing to reach net-zero carbon emissions by 2040. Amazon has also invested in renewable energy, electric delivery vehicles, and sustainable packaging. While these efforts are a step in the right direction, critics argue that more needs to be done to address the environmental impact of the company’s operations.
