What Are The Different Types Of Bank Accounts? (Checking And Savings Accounts)

Nowadays, many types of financial institutions exist, and these institutions offer different types of services. A bank is a financial institution regulated at the federal level, state level, or both. The primary role of a bank is to take deposits and make loans. 

Banks and the financial services industries play an essential role in the economy because they enable consumers to borrow money, make investments, save for the future, and manage routine chores such as making deposits and paying bills.

Some types of banks are central banks and commercial banks. In these banks, they exit two types of bank accounts that can be created: checking and savings accounts.

In this article, we provide you with information on the different types of bank accounts, the differences between a checking account and a savings account, and types of bank accounts based on accessibility. 

Types of Bank Accounts [Checking and Savings Accounts]

A bank is a financial institution regulated at the federal level, state level, or both. Basically, there are two main types of bank accounts:

• Checking accounts
• Savings accounts

a. Checking Accounts?

Checking accounts are the most basic and useful types of bank accounts. They are designed to have an unlimited number of deposits and withdrawals, and each withdrawal may be subject to fee payment.

Some checking accounts do not allow for interest to be paid on any residual balance in it. There is no restriction on the amount of cash held in a checking account or the length of time money is to be held.

The different types of checking accounts offered by banks and credit unions include:

1. Traditional checking account: These types of bank accounts offer checks, debit or ATM card, and online bill pay options. You can waive a monthly maintenance fee by maintaining a minimum balance; some traditional checking accounts don't charge fees. These accounts may also offer overdraft protection.
2. Premium checking account: This bank account typically offers perks that you otherwise have to pay for. These may include a free safe deposit box, free personal checks, free official checks, free money orders, and waived fees on some or all out-of-network ATMs. You are required to maintain a higher minimum balance on a premium account.
3. Student checking account: Owned by students of ages 18-23. Might not require maintenance fees for those who qualify. They may also offer overdraft forgiveness, ATM-free reimbursement, free checks, or other perks.
4. Senior checking account: This type of bank account is owned by people 55 years and above. They may offer free checks, waived monthly maintenance fees, and other perks beneficial to those who are retired or living on a fixed income.
5. Interest-bearing account/Call deposit account: There are variations on the checking account concept that are interest-bearing. However, they have more restrictions than a standard checking account (such as a maximum number of check payments to be issued each month) and may require a minimum balance
6. Zero-balance account: This account is funded only enough to meet the requirements of checks being presented for payment. By keeping the funded balance low, a company can keep most of its cash in an interest-bearing investment.

Other types of checking accounts include checkless checking accounts, business checking accounts, rewards checking accounts, second-chance checking accounts, and private bank checking accounts.

b. Savings accounts/deposit accounts?

Savings or deposit bank accounts are storage accounts, and thus few or no checks are written against these accounts. Depending on the type of savings account, there may be restrictions on the minimum quantity of cash that must be retained in the account, as well as the minimum time period for which the cash must be held. 

With savings accounts, you must notify your bank before going to do a withdrawal, and the bank pays you interest based on the amount of money you have saved and the time frame.

Various types of savings accounts exist, some of which include:

1. Traditional or regular savings account: This type of bank account is good for people who need to save money for a short or long term and are not as concerned about getting the best interest rate, expressed as the annual percentage yield (APY). This type of account allows you to make up to six months' withdrawals (not including withdrawals with ATM, in person, or at a branch) before incurring a penalty.
2. High-yield savings account: it is good for people to earn a more competitive rate on savings while minimizing fees. Typically found at online banks, neobanks, and online credit unions, they offer a higher APY compared to regular savings accounts.
3. Money market accounts: It is good for people who want to earn interest on savings while having more options for accessing their money. It combines features of a regular savings account with those of a checking account.
4. CD (certificate of deposit) account: it is good for people who want to earn comparative rates and will not need to access their savings right away. These are time deposits, meaning you agree to leave your money in the account for a set period to earn interest without withdrawal.
5. Cash management account: it is good for people who want to keep cash available to invest in their brokerage or retirement account. This account is not specifically designed for saving.
6. Specialty savings account: Good for people who want accounts tailored to specific savings goals.

You may also want to read:

• What Are The Different Types Of Savings Accounts?
• What Are The Duties Of A Banker/Customer In A Banker-Customer's Contract?
  

What is the difference between a checking and a savings account? 

After seeing the different types of bank accounts, it will be wise to discover the differences between them.

If you are new to banking, you might be curious about which type of account to choose, either a checking account to get access to a debit card or a savings account to take advantage of interest. Here are some differences:

1. The ability to access money at any time:

The ability to access money at any time is a big difference between a checking account and a saving account.

The primary distinction between checking and savings accounts is that checking accounts are used to access money for everyday consumption, whilst savings accounts are used to save money.

Checking accounts are considered "transactional," meaning that they allow you to access your money anywhere and at any time. This is possible due to their ability to offer debit cards, checks, and even digital payments like Apple Pay. In contrast, the number of withdrawals you can make from a savings account each month is limited.

2. Age Restriction:

Checking accounts, although convenient for daily cash needs, may be restricted to people under the age of 18 years unless a parent or spouse acts as a co-owner of the account, making sure that its terms fit your financial needs. On the other hand, savings accounts dedicated to kids through a parent or guardian are usually required as joint owners.  

3. Saving Money for Long-Term Goals:

Consider creating a savings account if you planned to set aside money for a long-term need or goal. Savings accounts are intended to keep money for a lengthy period of time in order to help you save for larger ambitions. Unlike checking accounts, which enable you to make deposits for everyday purchases.

As money stays in your savings account, it will accrue interest and grow over time. But with checking accounts, you are charged a fee for every withdrawal made. To access your money in a savings account, you have to go to your bank, set up a transfer online, or make an ATM withdrawal.

Different Account Types Based on Accessibility

We could also have different types of bank accounts based on the ability to gain access to the account.

When opening an account, whether a checking or a savings account, you are requested to say who can have access to your account. You may consider the following types of accounts: single, joint, and currency accounts.

1. Single Account Types:

These are either a savings or checking account that can be accessed by the owner, and any financial transactions on the account must be approved by the owner's signature or password.

2. Joint Account Types:

These are accounts in which more than one individual has legal rights to the account. It could be a family account, a business account, or a meeting account. It could be a checking or a savings account, but the limitation to these types is that all the parties involved mostly give in their concern before any financial transaction is made.

3. Currency account types:

Currency accounts are a way to keep, send, and receive multiple currencies. They can be useful if you are regularly making payments or receiving money in other currencies. It is important for people who travel a lot. Some of the types are

• US Dollar account: This type of account allows you to save, deposit, receive, and make payments in foreign currencies, including US dollars. It is also called a domiciliary account.
• XAF accounts allow financial transactions within the Central African States.
• An EUR account allows you to make financial transactions in euros. This helps cut the cost of switching between currencies.  

Final Thought About the Different Types of Bank Accounts

Both savings and checking accounts are good based on the condition requiring their creation. If you are in a business that requires you to make frequent deposits and withdrawals, then a checking account will be the best, but if you want to save money for a future project, then consider a savings account.

Ideally, you should consider opening both accounts to enjoy the benefits of each. Banks like NFC, ECOBank, and Santander Bank offer both types.