What Are the 7 Types of Bank Accounts?

Bank accounts are fundamental tools in personal finance, providing a secure and organized way to manage money. They enable individuals to save, spend, and invest, serving as the primary interface between people and financial institutions. Understanding the various types of accounts available helps in making informed decisions for diverse financial goals and day-to-day transactions.

Core Personal Accounts

Checking accounts and savings accounts are essential for most individuals’ daily financial needs. Checking accounts are designed for frequent transactions, offering easy access to funds for everyday spending. Features like debit cards, check-writing capabilities, and direct deposit make them suitable for managing regular income and expenses. These accounts typically do not earn significant interest, and some may carry monthly maintenance fees unless certain conditions, such as maintaining a minimum balance or setting up direct deposit, are met.

Savings accounts, in contrast, prioritize the accumulation of funds while earning interest. They are generally intended for holding money not immediately needed, such as for emergency funds or specific short-term goals. While they offer interest on deposited funds, transactions may be limited. Savings accounts do not typically come with check-writing privileges or debit cards, reinforcing their purpose as a place for growth rather than frequent spending.

Growth-Oriented Accounts

Money market accounts (MMAs) blend features of both savings and checking accounts. They generally offer higher interest rates than traditional savings accounts and may include limited check-writing or debit card access. MMAs often require higher minimum balances to open and maintain compared to standard savings accounts.

Certificates of Deposit (CDs) are time-deposit accounts where funds are held for a fixed period, ranging from a few months to several years. In exchange for committing money for a specific term, CDs typically offer higher, fixed interest rates than savings accounts or MMAs. Early withdrawals from a CD usually incur a penalty, such as a forfeiture of a portion of the interest earned, making them suitable for funds not needed until a specific future date.

Individual Retirement Accounts (IRAs) offered by banks are tax-advantaged savings vehicles for retirement planning. These usually take the form of IRA savings accounts or IRA CDs. For 2025, individuals under age 50 can contribute up to $7,000, while those age 50 or older can contribute up to $8,000 across all their Traditional and Roth IRAs. Traditional IRA contributions may be tax-deductible, with taxes deferred until retirement, while qualified withdrawals from Roth IRAs in retirement are tax-free.

Accounts for Specific Needs

Business bank accounts are distinct from personal accounts and are designed for commercial operations. These accounts help maintain a clear separation between personal and business finances, a practice crucial for legal and tax compliance. They often provide features tailored to businesses, such as multiple authorized signers, higher transaction limits, and integrated services like merchant processing or payroll.

Custodial accounts, such as Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts, are established to hold assets for the benefit of a minor. An adult, known as the custodian, manages the account until the minor reaches the age of majority, which typically ranges from 18 to 21 years old, but can be as high as 25 depending on the state and account type. Funds in these accounts can include cash, securities, and in the case of UTMAs, other assets like real estate. Income generated within these accounts may be subject to “kiddie tax” rules, where unearned income above a certain threshold (e.g., $2,700 for 2025) is taxed at the parent’s marginal tax rate.