Choosing the best savings account
Savings accounts generally have fewer options than checking accounts. Because the idea is to save the money in your savings account, it’s not as important that you have 24/7 access, online withdrawal options, unlimited check writing, and other conveniences that can add to the cost of the account. Instead, you'll want to look primarily at the interest you can earn, how long the account may require you to keep the money in the account, and what are the minimum balances.
Typical savings account options include:
- Basic savings account: These accounts are easy to open and you have quick access to your money. They usually pay a small amount of interest, and your money is insured up to $250,000 by the federal government.
- Money market account: The minimum balance to open a money market account is usually more—anywhere from $1,000 to $10,000. You'll earn more interest than with a basic savings account, but you may only be able to write a few checks a month. The account may or may not be insured, so check before opening an account.
- Certificate of deposit: When you open a certificate of deposit (known as a CD) you agree to have your money tied up and unavailable for a set period of time in exchange for a favorable interest rate. At the end of the term of the CD, which can range from six months to a few years, you'll receive your initial deposit plus the interest your account accrued. CDs you buy from FDIC-insured banks are insured up to $250,000.