Choosing guide

Choosing a savings account type: what to compare

This guide is for anyone deciding where to keep cash they may need, such as an emergency fund or money set aside for a near-term goal. It explains the common account types and the terms that matter, so you can compare real offers yourself. It names no banks and quotes no rates, because rates change often and differ by provider. Check each account's own disclosure for current figures.

The short version: for money you might need quickly, access and safety matter more than squeezing out the last bit of interest.

The main account types

Basic savings account. Easy to open and use, often with a low rate and sometimes a monthly fee or a minimum balance. Usually attached to a branch or an app.
High-yield savings account. A savings account that pays a rate above the usual baseline. These are often offered by online banks with lower costs. The label has no legal definition, so compare the actual rate and terms, not the name.
Money market account. A deposit account that can pay a higher rate and may include check-writing or a debit card, sometimes with a higher minimum balance. Do not confuse it with a money market fund, which is an investment product and not a bank deposit.
Certificate of deposit (CD). You agree to leave the money for a fixed term, often months to years, in return for a rate that is usually fixed. Taking the money out early normally costs a penalty, so a CD suits money you are confident you will not need before the term ends.

What to compare

Deposit insurance. In the United States, banks are insured by the FDIC and credit unions by the NCUA. The standard coverage is currently $250,000 per depositor, per insured institution, for each ownership category. Confirm the institution is insured and check the current limit on the official site before depositing a large sum.
The rate and how it can change. Banks quote an annual percentage yield, or APY, which includes compounding, so you can compare accounts on one basis. Most savings account rates are variable and can fall at any time. CD rates are usually fixed for the term. Ask whether a rate is a limited-time promotion and what it becomes afterward.
Fees and minimums. Look for monthly maintenance fees, minimum balances to open or to earn the stated rate, excess withdrawal fees and fees for paper statements. A fee can cancel out a rate advantage on a small balance.
Access. How fast can you move money to your checking account, one business day or several? Are there limits on withdrawals or transfers per month? Some accounts still limit them even though a federal rule no longer requires it. An emergency fund that takes a week to reach is a poor emergency fund.
Ease of use. Can you link it to your checking account, set up automatic transfers and see your balance simply? An account you can automate is more likely to grow. See when to automate savings and when to stay manual.
Separation. Some people prefer an account at a different institution from their checking account so the money is less tempting. Others prefer keeping everything together for simplicity. Both are reasonable.

Matching the account to the goal

Emergency money usually belongs in an account with same-day or next-day access and no penalties, which points to a savings or money market account. Money for a planned purchase in a year or two can sit in a savings account or, if the date is firm, a CD with a matching term. Longer goals involve a different set of tradeoffs, including risk, that are outside the scope of this guide. For help with long-term plans, a licensed financial adviser can look at your whole situation.

If you are unsure how much to hold, read how much to keep in an emergency fund. Whether a higher rate is worth switching for is covered in are high-yield savings accounts worth it.

How much does the rate matter?

It depends on the balance and the time. On a small balance, a rate difference of a fraction of a percentage point is a few dollars a year, so fees, access and your habit of depositing matter more. On a larger balance held for years, it adds up. The savings growth calculator lets you type two rates and compare the result for your own amounts.

Before you decide

Read the account's fee schedule and rate disclosure, not just the advertisement.
Confirm deposit insurance with the FDIC or NCUA, and check the current coverage limit.
Ask whether the rate is promotional and how it can change.
Check how long a transfer to your checking account takes.
Interest may be taxable, so ask a tax professional about your situation.

Where this comes from

We checked the FDIC's published description of deposit insurance (the standard $250,000 amount per depositor, per insured bank, per ownership category, with separate ownership categories) and the Consumer Financial Protection Bureau's explanation that the federal Truth in Savings rules require banks to quote APY so accounts can be compared. The descriptions of account types are general and drawn from common consumer-education material, and individual providers define their products differently. Check the current figures at the FDIC, NCUA and CFPB before acting.