There is a wide variety of bank accounts for you to choose from. Many of them have more than one name or definition.

For example, a personal account may also be a checking and a deposit account. Within this article, you will find definitions of the most common bank accounts.

Strictly speaking there are only about 5 different bank accounts:

  • Basic Checking Accounts
  • Savings Accounts
  • Interest Bearing Checking Accounts
  • Money Market Accounts
  • CD’s
  • IRAs (investment retirement accounts)
  • Brokerage Accounts

However, there are a lot of minor variations on the general type of bank accounts (and account type offerings between countries) that we can also mention.

This is our ultimate guide to all the different bank account types.

The Core Basic Bank Account Types

The following are the core bank accounts you’ll encounter. There are more specialized accounts we  talk about in the next section, but they are mostly either a renamed version of one of these core accounts OR a specialized version of one for a specific situation.

1. Checking Accounts

These are what people in places such as North America call demand deposit accounts. They are also known as debit accounts in Europe, or current accounts, or personal accounts. They are a very common type of account where the user has a checkbook and ATM card.

Before you open a checking account, you want to make sure you take advantage of a good checking account promotion to get the best deal.

They are usually free to open and use, but some have fees and some pay interest on the balance.

+ They are often used to pay bills

+ People may draw money from cash machines

+ They usually come with a bill pay and transfer function

+ Most checking accounts have an online function these days

There are quite few flavors of checking accounts out there that offer bonuses in specific areas.

Some examples may be:

  • free checking accounts
  • business checking accounts
  • interest checking accounts
  • joint checking accounts

Read our lists that recommend our specific picks for the bank accounts for 2015

2. Dividend/Interest Checking Accounts

Checking accounts are the most common accounts, but banks do offer specialized versions of the checkings account that offer higher interest rates.  Interest Checking Accounts (also called dividend checking accounts) are basically a combination of checking and savings accounts.

You get the higher interest rates of a savings account with the ability to withdraw money without penality. However, these types of accoutns typically require you to maintain a higher monthly minimum balance to either get the extra interest or avoid a monthly fee.

3. Savings Account

With this account, you are encouraged to save your money for a period of time. Some will pay interest on a statement cycle basis, others on an annual basis, and others after a term of time. It is an account where you money is not in liquid form. This means it is a little more difficult to get out on a whim. You may have to wait a few days before the funds are released, or you may be unable to retrieve your money until a pre-arranged and pre-agreed date. There are many banks that will allow you to withdraw the money early, but it usually comes with a hefty fee.

+ Not typically used to pay bills or buy things

+ May be used by people wishing to build wealth

+ Usually an interest bearing account

+ Often structured to encourage saving and punish withdrawals

The best savings accounts will usually offer you the following:

  • Federal Deposit Insurance
  • Easy access to any funds
  • Interest rates that are competitive
  • Online access
  • Mobile friendly

Read our lists of the best savings accounts for 2015.

4. A Money Market Account

These accounts are known as MMA (Money Market Account) or MMDA (Money Market Deposit Account). It is a non-financial account that will pay you interest based on current interest rates in the money markets. These types of savings schemes are only beneficial if your countries markets have a reasonably high interest rate. These are not money market funds; ergo the bank is still liable for your money.

+ Only good for countries with higher interest rates

+ A more dynamic way to save money

+ May be too difficult for many amateur or sporadic investors

+ Not suitable if you are having money trouble

+ FDIC insured

Basically, with a MMA you get a higher interest rate than you would with a regular savings account.

Difference between a Money Market Account and Savings

Money Market Accounts have less restrictions than do savings accounts, both for you and what the bank is allowed to do with the money you have stashed their for their own investment portfolio. Money Market Accounts usually have a higher account balance requirement as the minimum balance.

5. CD (or Marketed Linked CD – MLCD)

This is a Certificate of Deposit (CD), but is less common and only offered by a select number of financial companies and institutions. It may also be called an equity-linked CD, an indexed CD or a market indexed CD.

It is a very specific type of certificate of deposit that is linked to the performance of one or more market indexes or securities. The term length is often far longer than the usual CD. They were built to appeal to a select number of people, and work as a tailor-made and structured investment.

You have to leave your money in the account for a number of years, but your money enjoys growth as certain other businesses enjoy growth (to put it simply).

+ A potentially high-profit savings scheme

+ Tailored to the financial needs of the investor

+ Ideal for people with long-term savings plans

+ People that understand the market should consider them

There are a number of CD types that offer unique features:

  • IRA CD
  • Jumbo CD
  • Callable CD
  • No Penalty CD
  • Variable Rate CD

6. IRA Accounts (Individual Retirement Accounts)

IRA’s are simply an account where you stash your money for retirement. The concept is pretty simple, your account balance is not taxed UNTIL you withdraw, at which point you pay the taxes there. This allows you to grow your account with interest without taxes taking away from the balance. The net result is you earn more money.

There are two types of IRA’s: Traditional and Roth. The difference is that with IRA accounts, you pay taxes later while with Roth Accounts, you pay taxes right away.

Why would you want an IRA account?

We can give you at least three:

  • No taxes on your income growth
  • more investment choices through the account
  • extra savings because of the no-tax

How to open an IRA

You’ll need to go to a specialized investment company to start an IRA, your bank has to offer one, or you can look online to find a list of the best IRA accounts. Once you find and open the accuont, you simply transfer funds in from your bank account.

Specialized Account Types

These accounts are not so much bank account types but just specialized versions of the accounts already mentioned OR they are simply just another category name for the core accounts listed above.

But it’s a good idea to know what they are because some offer particular advantages in one area you may need — as such, they may be more suitable than regular accounts.

A Deposit Account

Deposit accounts may take the form of savings accounts, and current accounts. A deposit account is the name given to an account that allows money to be deposited into the account and then withdrawn. That should apply to most bank accounts, but many people consider a deposit account to be one where you may deposit and withdraw money relatively quickly. Many associate them with having checks and/or a bankcard (ATM card). Your money is put into the bank and becomes their liability. Some charge you fees and others pay you interest.

+ Most people need some sort of deposit account

+ Many people use them to have their wages paid into

+ Many use them for government benefit money

+ Deposit accounts are needed to pay utility bills

A Transactional Account

With this account, the funds are held in a liquid form. This means the money is always readily available for the account holder to use. It may be removed online, by wire transfer, by ATM machines and by signing a check. Since many accounts are also transactional accounts, there is a chance you may be able to pay for things in shops with your transactional account.

+ Used in business and by private citizens

+ A holding place for your money

+ Many accounts are also transaction accounts

+ Money is almost always available online

Demand Deposit Accounts

These are very similar to transactional accounts, and in some countries the meaning is the same. The only possible difference between these accounts and transactional accounts is that demand deposit accounts may take less time when moving money in and out of the account. On the other hand, transactional accounts may be built to hold company budgets of thousands of dollars.

+ Some countries may consider these the same as Transactional accounts

+ Businesses may have specialized demand deposit accounts

+ Many personal accounts are some form of demand deposit account

+ Personal accounts are usually described as something other than demand deposit accounts

Current Accounts

These are checking accounts and for many people, the most popular type of account; originoally, checking accounts were called ‘checking accounts’ because you could write checks to withdraw and deposit into that account. However, checks are now almost obsolete in places more advanced countries, which is why checking accounts are often now called current accounts, personal accounts, or debit accounts (to avoid confusion).

They have an ATM card that is also called a debit card, though they are actually pre-paid cards (technically) because money must be in the account before it may be taken out at a cash machine. People may set up direct debits to pay their bills automatically on a routine basis.

+ Often used with a card to buy things in shops and withdraw money at ATMs

+ Most current accounts have online account/money management

+ Many current accounts do not have fees, but also do not pay interest

+ They are commonly linked with other accounts such as PayPal

Special Savings Bank Account

Note to be confused with a regular Savings Account.

These are mostly seen in places such as India, and they are checking accounts without checks. They may have ATM cards, and will often allow you link accounts to them and pay bills. They are often called savings bank accounts because they act like debit/current/checking accounts, but it takes a little longer to put money in and take money out, which is a little like a savings account. The general idea is that you are rewarded with interest if you keep your money in them and do not spend your money as soon as you receive it.

+ Often seen in places such as India

+ Drawing out your money may be more difficult or time consuming

+ The name is meant to encourage people to leave their money in longer

+ They often offer an incentive to keep your money in them

Transactional Deposit Accounts

These are accounts that are mostly seen in the USA, but even though an account may be a transactional deposit account, it is rarely called one because it confuses the customers. The same is true of demand deposit accounts. As stated in the introduction, a bank account may be a number of different things, and most checking accounts are also transactional deposit accounts. They are accounts that may have money withdrawn from them directly without limits or restrictions.

+ Used by people who need access to their money on an adhoc basis

+ Businesses are usually charged transaction fees

+ Your money is kept in a liquid form

+ They are the opposite of time-deposit accounts

A Flexible Savings Account

This is an account that, as the name suggests, a more flexible version of the savings account– one that allows you to save money that you may withdraw at short notice. The penalty for this perk is that the interest rate is very low. Another benefit is that some banks allow interest to be paid on a monthly basis, which means people do not have to leave money in their savings account for a year; they only have to save it for a month in order to earn interest.

+ This account is ideal for people that are not in debt

+ Good for people that are bad at budgeting

+ It is a good place to store your contingency fund

+ Often used to store unspent wages to discourage overspending

A Peer-To-Peer Lending Account

There are financial companies that offer peer-to-peer lending options. They hold a fair amount of risk because you are lending money to the public with the hopes they pay it back with the agreed interest. However, the good peer-to-peer services will have a contingency fund that compensates the lenders. You invest a certain amount of money for dedicated terms. The terms usually range from between a month to three years. You get to see how much money you get in return for keeping your money in the account. The money you invest is put into a fund that the company uses to lend money to people. They repay the loans with interest, you get your money back plus interest, and the lending company takes the rest of the interest that was paid.

+ A good way to save in the short term

+ It is risky but usually has a good interest rate

+ Great for people that want to lock their money away for a short while

+ A fantastic option after so many banks screwed people out of their savings

Individual Savings Accounts (ISA)

This is a UK invention that allows citizens to save a certain amount of money in return for a very good interest rate. It also qualifies for favorable tax status, allowing people to save whilst avoiding tax at the same time. The amount a person may save is limited, after which point a person doesn’t receive interest. The difference between this type of savings scheme and other more common saving schemes is the great interest rate for just a year’s saving, the favorable tax status, and the fact your savings cannot be used as security for a loan, nor is it a way to save for retirement.

+ A nice and safe way of saving money

+ It takes a few days to draw the money out when it is needed

+ A pleasant way to build a contingency fund

+ It is a potential gateway to more complex saving schemes

A Time Deposit

You may have heard this type of account called a “Certificate of Deposit,” but they are different. Some people also call them a term deposit, and they involve agreeing to save your money for a certain period of time. You are not allowed to withdraw the money without a serious penalty. Once the term/time has ended, you may choose to have the money sit in your account in a liquid form, you may choose to have it reinvested in another time deposit, or you may choose to withdraw your money.

+ Ideal for people that have had a sudden windfall

+ The longer you save then the higher the yield is

+ Often used by people who need to save money for a special occasion

+ The opposite of a sight deposit or on-call deposit

Certificate Of Deposit

As stated earlier, these savings schemes are very similar to time deposits in that you have to save a certain amount of money for a set amount of time. Yet again, you pay a big fee if the money is withdrawn before the term has finished, and the longer you save, then the more money you potentially earn. The difference between these and time deposits is that certificate of deposit are often more negotiable. A certificate of deposit (a CD) is often negotiable and may be rediscounted when the user needs a little cash freeing up and making liquid. A time deposit will not offer such options and will need to mature before money is made liquid.

Bonds

In the UK, a time deposit is called a bond. The user is not able to negotiate the release of some of the money; it must be left in the account until it matures after the agreed term has expired.

+ Used by people in the UK to save over a period of time

+ Good for people that have had a windfall

+ Bonds are considered a safe saving option in the UK

+ Great for people wishing to start shares trading in a few years

Savings Bonds

These are similar to bonds, which mean they are similar to time deposits. However, they are backed by the government. They exist in a number of countries, and are considered the safest type of saving option because they are backed by the treasury of the government that issued them. However, the bond is only as safe as the country itself. For example, take out a savings bond in the US, UK or Germany, and you are guaranteed a safe bond, but take it out in certain other countries and you roll the dice and hope nothing bad happens between now and then. However, even despite the risks, they are still safer than most types of savings investment.

+ Backed by the government and so are a little safer

+ A good and productive way to save money

+ An ideal starting point for people building wealth

+ Very easy to understand and buying savings bonds is easy

Pre-Payment Accounts

These are accounts where you are able to pay for things without actually giving away your bank details. This is done with a link to your checking or current account. Linked accounts mean you can make purchases and have the money drawn from your bank account without having to load the money in advance. Being linked allows a third-party company to act as an intermediate party. PayPal currently has a monopoly in this area, but is so powerful that it is not regulated as a monopoly. They also offer money management functions, currency conversion, and even an ATM card that you can use wherever MasterCard is accepted.

+ Perfect for people using online auction sites

+ Good for people that cannot get bank accounts

+ A slightly more secure way of spending money online

+ Commonly associated with a way of allowing e-payments

Brokerage Accounts

This is a specialized account for investing into the stock market without having an IRA account or utilizing a 401k account.

Why would you want a brokerage account? Because you might just want to put your money into an investment account that’s not your retirement account (IRA account) or you’ve capped your retirement accounts and need another account you can to invest.

Brokerage accounts let you buy, sell, trade in stocks, bonds, mutual funds, and other such investments. And you might not need to pay taxes on any growth on those investments, depending on the account and the situation.

Typically though, you will pay a commission when you start making trading out of your account — so keep that in mind.

An Online Only Account

This is a type of account that doesn’t have the benefit of branches that you can visit. All of your deposits have to happen as transfers, or as cash deposits in ATMs and select locations. You may use and manage your money online, and are given a checkbook (sometimes) and an ATM card. However, you are not able to visit a branch and draw out your money or talk to their staff face-to-face.

+ It is easy to manage your account online

+ Many people prefer online-only accounts because they have no reason to visit a branch

+ Some feel they cannot trust a bank they cannot see on the high street

+ Easy to open, but may take slightly longer than going into a branch

An Offline Only Account

There are very few of these types of banks in developed countries, though there are a few that are known as secret banks. They either do not have online options, or they have limited online options. It is unfeasible to have branch-only accounts these days. There are ways around all branch-involved processes. For example, some companies have apps that allow you to photograph your checks as a way of depositing them. Many online accounts allow linking with other accounts to pay bills, or to pay loans off. Moving your money is very easy online and doesn’t even involve a phone call.

+ Besides storing your money in secret, there is no need to have an offline-only account

+ Inconvenient because most money management must be done manually and in person

+ Soon to be obsolete in developed countries

+ Even small banks have online options these days

A Joint Account

With a joint account, you are able to share your money with another person. This means that all of yours and your partner’s money goes into one account. Some people do this to greatly simplify their accounts at home. Some do it as an act of commitment and love, and some do it to build their credit rating. Some do it because it helps them budget with fewer accounts, but you do not have to make your joint account your main account. Both may still keep their own accounts and only add to the joint account for things such as saving for larger purchases.

+ Ideal for loving couples

+ They do require a fair amount of trust between the couple

+ Banks do not promote them because they are not as profitable

+ Examine the benefits and drawbacks before deciding.

A Numbered Bank Account

There are times when people wish to keep their identity a secret and so put their money in numbered accounts. The accounts do not feature names, they just feature numbers. The bank has your name and details on file, but they are stored away and assigned a number. Things such as your statements appear with a number code as opposed to with your name. It gives the account holder a degree of privacy and confidentiality when it comes to financial transactions. Numbered accounts are mostly illegal, but are still alive and well in countries that are known for black market and untaxed money being stored (such as Austria and Switzerland). Even with numbered accounts, bank privacy is not guaranteed because many developed countries have set up treaties where they are able to examine the accounts of users.

+ Illegal in most countries

+ Heavily policed

+ Used to keep financial transactions secret

+ Many banks that offer such services are charging withholding tax.

Offshore Account

These are, as the name suggests, bank accounts that are set up outside one’s home country — usually in tax-friendly or tax-free areas. These days, it’s harder to utilize offshore accounts to escape from taxes back in your home country, but it still is possible in some circumstance.

There are certain countries that do offer offshore accounts to people from other countries. Some of these countries are Switzerland, Cayman islands, Ireland, Hong Kong, and Belize to name a few.