🕐 Read Time 6 Minutes

Knowing where to stash your cash can feel a bit like choosing your fighter in a video game. Each option comes with its own set of powers, weaknesses, and strategies to maximize your wealth. Some of you might be thinking, "Any old bank account will do, right?" Let me stop you right there. Not all bank accounts are created equal — they come in different shapes and sizes, each with its own set of pros and cons.

Let’s look at some of the most common bank accounts. Getting your cash situated in the right spot can maximize returns, minimize fees, and generally make your money work harder for you.

5 Types of Bank Accounts for Maximized Earnings

Below you’ll learn about: 

1. Traditional savings accounts

2. High-yield savings accounts

3. Money market accounts

4. Certificates of deposit

5. Cash management accounts

Start reading and discover how to start boosting your wealth and maximizing your earning potential. 

1. Traditional Savings Accounts

Let's start with the classic savings account. You walk into the bank, deposit money, and the bank gives you a little somethin’ somethin’ in return — interest. It won't make you a millionaire, but it’s a safe place to keep your emergency fund or vacation stash. 

Traditional savings accounts typically offer a modest interest rate, generally ranging from 0.01% to 0.50% APY (Annual Percentage Yield). While the returns may not be the highest, these accounts offer the peace of mind of FDIC insurance, ensuring your deposits are protected up to $250,000 per account.

Your money is easily accessible whenever you need it, without excessive withdrawal penalties or restrictions. Planning a spur-of-the-moment getaway to Bali? No problem, just transfer from savings. Check with your banking institution to see if they limit the number of free transfers per month. Until 2020, a federal rule called Regulation D required that banks limit free transfers to six per month. The government has relaxed the regulation and no longer requires banks to follow it (but most still do).

Some banks, but not all, may require you to meet certain balance minimums, or you may face maintenance charges.

2. High-Yield Savings Accounts

For those who prize earning higher returns on their cash reserves, high-yield savings accounts (HYSAs) are where it's at. Essentially, high yield savings accounts explained simply is that they are a type of savings account that pays a higher interest rate compared to traditional savings accounts. Currently, rates are averaging between 4.35% and 5.5% APY, but they can vary often so keep your eyes peeled for the best rates.

HYSAs are typically offered by online banks since they don't have the overhead costs of maintaining physical branches. You'll still enjoy the same FDIC protection as savings accounts at brick-and-mortar banks.

The big trade-off? You may face stricter requirements like higher minimum balances to earn the premium rates. Watch out for monthly fees that could negate your higher interest earnings if you don't meet those minimums.

The tricky thing about online banking is that you don't have a physical branch to walk into to deposit or withdraw cash. Generally, money is transferred to accounts you have at other banks, so you may have to wait a couple of days for your funds.

3. Money Market Accounts

Money market accounts (MMAs) are like the Swiss Army knives of the banking world — versatile, reliable, and always handy to have around. These hybrid accounts combine the characteristics of savings and checking accounts and usually pay higher interest rates than regular savings accounts.

Your funds are still fully liquid and generally FDIC insured (but always double-check). You can usually write checks or use a debit card from your MMA, although there may be a limit as to the number allowed each month. However, you can also walk into the branch and withdraw your money anytime.

Watch out for minimum required balances or monthly maintenance fees.

4. Certificates of Deposit

If you're looking to lock in a fixed interest rate for a set period of time, certificates of deposit (CDs) may be the way to go. CDs offer higher interest rates than traditional savings accounts, with the tradeoff being that you'll need to keep your money deposited for a specific term, which can range from a few months to several years. Generally, the more money you invest in a CD and the longer the term, the higher the interest rate.

CDs can be an excellent option for customers with a lump sum of cash they don't need immediate access to. By investing in a CD, you can earn a higher return on your money while enjoying the security of a fixed interest rate. Be mindful of early withdrawal penalties if you need to access your funds before the CD's maturity date.

Your CD is federally insured for up to $250,000 as long as your bank or credit union is a member of the FDIC or National Credit Union Administration (NCUA).

5. Cash Management Accounts

Last but not least, let's look at a banking product that has been rapidly gaining traction in recent years: the cash management account (CMA). These hybrids blend characteristics of checking, savings, and money market accounts into one slick package.

Perks of a good cash management account may include:

• High-interest rates rivaling or exceeding money markets

• FDIC-insured (often provided through third-party banking partners)

• Easy access via debit card, check-writing, bill pay, and free ATMs

• Ability to invest cash through linked brokerage accounts

In other words, it includes all the benefits of a checking account plus the strong interest rates and investment ties of a money market fund. That’s a pretty enticing deal, right?

The flip side is that brokers and fintech companies offer most CMAs rather than traditional banks. So, while these new accounts keep innovating and adding awesome features, you may not have the same warm familiarity as your old neighborhood bank.

There can be higher minimum balance requirements to qualify for the premium features, often $25,000 or more. Many firms that offer CMAs don’t charge monthly fees, but that isn’t always the case.

CMAs could be a good option for those looking to park a large amount of cash. Since your money is actually “swept” into accounts at partner banks, your money may be spread out to multiple banks.

Choosing the Right Type of Savings Account

Now that you've learned about the different types of savings accounts available, it's time to consider which ones might be the best fit for you. Here are a few factors to keep in mind:

1. Liquidity Needs: Assess how quickly you'll need access to your funds. If you have many short-term expenses or unpredictable cash flow, a traditional savings account or a money market account might be the way to go. A CD might be a better option if you have a more stable cash flow and can afford to lock up your money for a set period.

2. Interest Rates: Compare the interest rates offered by different banks and account types. While the differences may seem small, they can add up over time, especially if you have a significant amount of savings.

3. Fees and Minimums: Be mindful of any costs associated with the accounts, such as monthly maintenance fees or minimum balance requirements. These can eat into your earnings, so choose accounts that align with your financial situation.

4. Accessibility: Consider how easy it is to access your funds. Some accounts may offer online banking, mobile apps, or ATM access, while others may have more limited options.

5. Bundled Services: A CMA might be worth exploring if you're looking for a one-stop shop for your financial needs. These accounts often have additional features like investment options and bill pay services.

Remember, the right mix of bank accounts will depend on your unique financial goals and needs. There’s no one-size-fits-all “perfect” account out there. Feel free to shop around, compare options, and choose the accounts that will help you maximize your wealth and achieve your long-term objectives.

Do You Want to Save More and Spend Less?

Are you looking for ways to save more so you can stash away more of your hard-earned money into the savings vehicle of your choice? Get a copy of our Top 20 Tips to Save More, Spend Less Without Sacrificing Your Lifestyle. 

At Financial Fitness Coaching, we work alongside you to create a financial plan based on your personal values and goals so you can maximize your savings potential. Let’s start padding those savings accounts and watch your money blossom.