Mastering The Bank

Let’s break down the main types of bank accounts, how banks protect you and other secrets of their world!

Banks offer many services, but the one we all use most often are bank accounts. There are four main types of accounts to know about.

The most common are checking and savings accounts. Then the are money market accounts and certificates of deposit. We’ll break them all down here.

Is my money protected?

Before we get to each of these types of accounts, it’s important to know that most money deposited in US banks is protected. All four of these types of accounts – savings, checking, money market and CDs – are insured by the federal government up to $250,000 per person at each bank.

The Federal Deposit Insurance Corp, the FDIC, and the National Credit Union Administration, the NCUA, insure federal banks and credit unions in the US to protect people’s money in the event that a bank fails.

You should always confirm that your bank or credit union has this type of insurance and know that money kept in your Venmo account or in crypto currency does not receive this type of protection.

Checking accounts are what we use for everyday activity. They’re called that because people actually used to write checks out of them.

You may still use paper checks, like for rent, or take cash out of that account from an ATM or pay out of the account with a debit card. The debit card links to your checking account.

A savings account is different. You can also use it and earn some interest on your money.

For example, you open a savings account with $1000 that pays 2% interest a year. After one year, $1000 becomes about $1020. It’s not a huge amount, but it helps.

In five years, that $1000 would be $1104 even if you don’t add more money. You get a little benefit while it encourages you to save it because it’s in a separate account.

 $ 1000
x 2%
In one year      $1020
In five years    $1104

Read more about earning interest in a savings account here.

But what if I run out of money in my checking account?

You can still access it from a savings account. You can withdraw it or move it from your savings to your checking account. Most banks even let you link it automatically so if you spend more than is in your checking account, it will automatically take it from your savings account.

There’s a limit of how often you can move money in and out of your savings account and a few other restrictions, depending on your bank.

So it helps you build up your savings plus separates your money into two portions, so you don’t think you have extra money to spend.

Money Market Accounts

The third type of bank account is a cross between checking and savings; a money market account is a savings account that offers a debit card and lets you write checks out of it.

Money market accounts generate interest on the money you have in there – in other words the bank pays YOU a fee for letting them hold your money. Right now that may be 2.5% a year in interest , which works out to $25 interest on $1000 in the account.

The main problem with money market accounts is they often require a large deposit to open one – perhaps $10,000 or $25,000. But each bank is different so yours may offer an option that works for you.

Please note there is a similar but different thing investment companies offer called a money market fund / money market mutual fund. Money market accounts are protected by federal deposit insurance while money market funds are not, so you could lose all your money.


The last type of bank account we’d like to discuss are Certificates of Deposit. CDs, as they’re often called, offer you guaranteed interest on the money, at a rate higher than a savings account. (No ’90s music included.) We wanted to make sure you got all the information you need, so we separated this into its own topic.

And a funny bit on bank accounts from the humorously out of date Mad Men era to end this page.

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