A college student can’t live without a bank account. It’s a fact. And it’s also an opportunity for young people to learn about money management and financial literacy. But which bank account should you choose? You have options, from online banks that offer low-fee accounts with no minimum balance requirements to traditional brick-and-mortar banks that offer higher interest rates on savings accounts. Here are the four types of accounts best suited for college students:
1 Checking Account
A checking account is the most common type of bank account, and it’s probably what you’re already familiar with if you have a savings account. With a checking account, you can deposit money, withdraw cash from ATMs or at the bank (but not any other financial institution), and make purchases using your debit card. You can also write checks against your balance to pay bills—or pay people if they don’t accept credit cards or direct debit payments.
Checking accounts tend to come with low fees compared to other types of accounts like money market accounts and CDs, but this varies by institution; some banks don’t charge monthly maintenance fees while others do. Some banks charge more than one fee per month in addition to their monthly maintenance fee: overdraft protection is one example that comes up often in searches for “best checking accounts.”
2 Savings Account
As a college student, you’re probably not making a ton of money. You’re also probably still living with your parents or in an apartment that’s super cheap. In this case, a student savings account is perfect for stashing away extra cash. Savings accounts are great for putting money aside for a rainy day—say, if your car breaks down and needs repairs—or to save up for something big like a vacation or paying off credit card debt. And since they’re FDIC-insured (meaning the government guarantees them), they offer an additional layer of security when compared to other types of accounts like checking and money market accounts.
You can also use the mobile banking app to manage your savings account. As experts at SoFi point out, “keep an eye on your spending and saving, pay friends and family, get real-time alerts, and more. All in the app.”
If you’ve got some extra cash lying around after paying your bills each month and want to stash it away somewhere safe, open up a high-yield savings account! It’s basically free money because banks give out interest rates so high that it makes sense to put some dough here instead of keeping it in check where nothing happens unless there’s an ATM fee involved.
3 Money Market Account
A money market account (MMA) is a savings-like account that offers more flexibility than a traditional savings account. MMA’s are generally FDIC-insured and offer more interest than a traditional checking or savings account. However, they do not pay as much interest as a CD or investment product such as stocks or mutual funds.
Money market accounts can be advantageous to college students who want to save money but still have the ability to spend it if needed. Money market accounts are also great options for students who are saving up for long-term goals such as buying their first car or house after graduation.
4 Certificates of Deposit
Certificates of deposit, or CDs, are another type of savings account that locks your money away for a certain period of time. They’re a great way to save money for specific goals, like a vacation or down payment on a house.
CDs usually offer higher interest rates than traditional savings accounts and require you to keep your money in the account for at least one year (some banks even offer multi-year options). The downside is that they usually require a minimum deposit; however, it’s possible to open an online CD with as little as $1 if you’re willing to put up with some small fees and restrictions on withdrawals.
If you’re a college student, it’s important to have the right bank account for your needs. The best way to find out which type of account is right for you is by researching each option and comparing them against each other.