What Is a Deposit Account?

Bank deposit accounts come in different forms — figure out which type suits you best.

A bank deposit account is any account — savings, checking or other — at a financial institution that enables an account holder to deposit or withdraw money. A bank records individual transactions on deposit accounts and records balances as liabilities, or what the bank owes the customer.

Here are the four types of deposit accounts:

  • Checking accounts
  • Money market deposit accounts
  • Savings accounts
  • Time deposit accounts

Explore the details of each type of deposit account so you can choose the best bank account.

Types of Deposit Accounts

Many bank deposit accounts carry fees such as monthly maintenance fees, ATM or overdraft fees or minimum-balance fees. When choosing a deposit account, research the fee structure and benefits to find the best account for your needs. Some deposit accounts come with fees and some come with interest. Do your homework well and you might find some that come with interest and no fees.

Find Out: 12 Banking Fees You Should Never Pay

Deposit accounts serve different purposes. Learn more about the four types of deposit accounts and when it’s best to use one type over another.

Checking Accounts

Checking accounts are deposit accounts that enable account holders to conveniently access their funds in a number of ways. Checking accounts are often called “demand accounts” because the funds in them must be accessible to customers when they “demand” them. A checking account differs from other types of bank accounts because it allows for unlimited withdrawals and deposits.

Many banks offer free checking accounts but some charge monthly maintenance fees as well as overdraft charges. Shop around to find the best checking account for your financial needs.

Some banks have minimum deposit amounts for checking accounts and those amounts vary among financial institutions. For instance, U.S. Bank requires you open one with $25, Great Western Bank requires $50 and Capital One 360 Checking requires $0.

In addition, banks typically charge monthly service fees but provide customers ways to avoid them. Setting up direct deposit and keeping a minimum balance in your account are common ways to bypass those fees.

See: 10 Best Checking Accounts of 2017

Savings Accounts

Savings accounts are different from checking accounts because you cannot write checks on savings accounts or use a debit card to access funds. Banks typically pay interest on savings accounts and the rates vary widely, so make sure you do your research to find the best savings account.

Savings accounts are generally stricter in terms of their regulations in comparison to checking accounts. Because money is not withdrawn by check or debit card, however, there are no over the limit fees in the way that there are with checking accounts. Savings accounts are preferable in many circumstances because they offer interest returns, where checking accounts do not.

Read: 10 Best Savings Accounts of 2017

Money Market Deposit Accounts

A money market deposit account is a type of savings account that usually earns a higher interest rate compared to traditional savings accounts. The minimum balance required is often higher and the monthly withdrawals are limited. It’s a hybrid of a savings and checking account.

You can usually find a good interest rate on a money market account and withdraw your money, but you’re limited in the number of transactions you can make per month, which is usually six.

Time Deposit Accounts

A time deposit account comes with a specific time period that doesn’t allow you to withdraw money — when it’s over, you can either take your money out of roll it over. A time deposit account, like a certificate of deposit, generally pays higher interest rates than a savings account.

Related: Choose the Right Bank Account for You

Choose a Deposit Account Based on Your Needs

Choosing the type of deposit account you want boils down to personal preference. Most people must have a checking account to conveniently pay bills and write checks, but choosing among the others depends on what you’re looking for.

If you don’t mind leaving your money in a deposit account for a predetermined amount of time, you might want to open a CD to earn higher interest rates than you would on a savings account. If you want to keep your money liquid but still earn a little interest, a savings account might be your best choice. Choose a money market deposit account if you would like a mix of checking and savings, but make sure you won’t be conducting more than six transactions per month.

Keep Reading: What Is the Minimum Deposit for a CD?