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Strategies to Save

Understanding the Various Types of Deposit Accounts

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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A deposit account is an account at a bank or credit union that allows you to safely and easily manage your money. Deposit accounts fall into two major categories: demand deposits and time deposits.

Demand deposit accounts, which include checking and savings accounts, may let you withdraw up to the full amount of your savings at any time without gaining permission from the bank or credit union. Time deposits, like CDs, restrict your access to funds for a set time period.

What are the types of deposit accounts?

The two key features of deposit accounts

All deposit accounts offer two primary features: security and interest.

Security

When deposited into an insured financial institution, your money is protected in the event of bank failure up to the legal amount per account by the Federal Deposit Insurance Corporation (FDIC), or up to the legal amount per credit union account by the National Credit Union Administration (NCUA). Joint accounts with two account owners get double the protection from the FDIC or NCUA. You can find out if the bank you’re considering is insured by the FDIC here.

Interest

You’re not just putting money into a deposit account to keep the funds safe — you also want to be rewarded for letting the bank hold your money. After all, banks and credit unions use funds held in deposit accounts to make loans to other customers, and earn profits. Interest payments is how banks and credit unions reward their deposit account customers, and incentivize them to keep funds in their accounts.

The longer you leave your money and earn interest in the bank, the greater the interest the account will earn. This is called “compound interest.” Depending on the bank and the account, interest may compound on a quarterly, monthly, weekly or daily basis. The more often interest compounds, the faster your balance grows.

When comparing prospective deposit accounts, you’ll want to review the annual percentage yields (APY). The APY advertised by your bank or credit union is the amount of interest you’ll earn in one year — the APY factors in the interest rate on the account as well as how often it compounds, so comparing APYs is the best way to compare the earning potential of different accounts.

Features of the main types of deposit accounts

These are the five main kinds of deposit accounts — let’s take a look at how they work and when you need them.

Checking accounts

Checking accounts are demand deposit accounts that let you deposit or withdraw money whenever you want. A checking account provides easy access to your money via paper check, ACH transfer, debit card, or cash withdrawal at a branch or ATM.

Some checking accounts pay interest, with our list of best accounts available paying upwards of 4.00% APY or more, as long as minimum balance requirements are maintained. But note that many checking accounts pay minimal or even zero interest, and regulations do not require institutions to offer interest payments on checking accounts.

Checking accounts may charge fees, including monthly maintenance charges; however, fees may be waived if you maintain a minimum balance or set up recurring direct deposits. You can be charged for money orders or cashier’s checks, and there may be limits on the amount you can withdraw in a given day or per ATM visit. Writing checks or swiping your debit card for amounts you don’t have can result in costly penalties like overdraft fees, insufficient-funds fees, or returned-check fees.

When to open a checking account

  • Checking accounts are one of your most important personal finance tools. This is where you manage the money you earn and spend on a day-to-day, week-to-week basis.
  • If you’re earning a low APY or earning no APY on your checking account, now might be the right time to examine your options. There are plenty of high-yield checking accounts available on the market today.
  • Look for checking account with zero fees. There are simply too many zero-fee options for you to be paying monthly account fees for your checking account.

Savings accounts

Savings accounts are demand deposit accounts that offer interest on your balance. Interest may be compounded daily, weekly, monthly, or annually. The benefits of savings accounts can vary widely based on requirements for a minimum opening deposit, monthly service fees, interest rates, and how the interest is calculated.

Savings accounts aren’t meant to offer the ease and frequency of access you get with checking accounts, but some do offer debit cards and even checkbooks. The Federal Reserve’s Regulation D mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle. If you exceed your transaction limit, the bank may charge you a fee, close your account or convert it to a checking account, so check with your bank about requirements and penalties.

When to open a savings account

  • You may want to look into moving your savings into a high-yield savings account if you can get a better rate than what you’re earning with your current savings account.
  • When considering a new savings account, look for the highest possible APY you can find — most often, that means looking at our list of online savings accounts, which we have found consistently offer the best rates in the business.
  • Skip accounts with any monthly maintenance fees, as they eat into your returns. Also keep an eye on minimum balances to earn the highest possible APY.

Money market accounts

A money market account (MMA) is a high-yield deposit account that offers interest rates very similar to those offered by savings accounts. Money market accounts often provide access to your funds via debit cards or checks. However, like savings accounts, they too are subject to Regulation D which mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle. You should check with your credit union or about any transaction limits and potential penalties. Minimum deposit requirements for MMAs are frequently higher than those for savings accounts.

When to open a money market account

  • Money market accounts have many of the same benefits and restrictions as savings accounts. MMAs generally require higher minimum deposits to open than savings accounts, and in exchange for that, you may be able to secure a higher APY. If you have a large sum you wish to keep as a liquid asset, a money market account may be your best option.
  • If you need easy access to your funds, a debit card or even a checkbook can be reasons to choose an MMA — although many savings accounts offer these conveniences as well.
  • Like with savings accounts, you need to understand the minimum balance required to earn the account’s highest advertised APY.

Certificates of deposit

Certificates of deposit (CDs) offer a way to earn higher rates of interest than those offered on savings accounts. CDs are time deposits, with common terms between one month and ten years. With a CD, you cannot withdraw money before the CD matures without incurring a penalty.

Penalty rates vary across the industry and by CD term length, but penalties generally amount to losing some or most of the interest you’ve earned on your investment at the time you withdraw. The interest rates are fixed over the term of the CD. The CD may automatically renew upon the maturity of the original deposit, so check with your bank or credit union for details.

CDs are insured by participating institutions up to the legal amount per account, per institution by the FDIC for banks and the NCUA for credit unions. Larger principal deposits and longer terms may fetch more competitive rates, although investors need to be sure they are comfortable losing access to their money for long durations.

You can stagger multiple CD maturity dates to create a CD ladder as a way of maintaining liquidity, capitalizing on increasing rates, and hedging against falling rates.

When to open a certificate of deposit

  • CDs are only a good option if you don’t need access to your money for whatever term you choose — either a short-term certificate with a term numbered in months, or a long-term CD lasting years.
  • Some CDs offer higher interest rates than savings accounts. Again, though, you must be prepared to leave your funds untouched for the term of the CD. Beware of high penalties for early withdrawals, before the end of the CD’s term.
  • Locking your money up in CDs could be a good strategy when market interest rates are falling: You can maintain a higher APY while other deposit accounts see declining rates. Conversely, they might not be the best choice when market rates are rising: By locking in a CD, you might miss out on higher APYs on other deposit accounts from higher rates.

Individual retirement account CDs

Individual retirement accounts (IRAs) are tax-advantaged vehicles designed to help people save for retirement. With an IRA CD, you may use funds saved in your IRA to invest in designated CD products. Credit unions, banks and brokerage firms offer IRA CDs, available as either traditional IRAs or Roth IRAs.

IRA CDs share most characteristics with regular CDs. IRA CDs may renew automatically like traditional CDs, so it’s important to keep track of your CD maturity dates so you can make educated investment decisions when the CD term ends. Keep in mind that deposits into an IRA account are subject to annual IRA contribution limits.

Like regular CDs, IRA CD investors need to beware of early-withdrawal penalties. Not only are there penalties for withdrawing from the CD before it matures, but if you remove the funds from your IRA, there is an IRS tax penalty of 10% on any distribution you take before you reach 59½ years of age. Still, the IRS may waive early distribution penalties for certain situations, such as a withdrawal of funds applied to a first-time home purchase.

When to open an IRA CD

  • IRA CDs are a great option for conservative retirement investors who want a decent rate of interest, without exposure to volatile stock or bond markets. 
  • Unlike stock and bond investments in IRAs, IRA CDs are insured by the FDIC and NCUA up to the legal amount per account, per institution.
  • Like standard CDs, IRA CDS prevent you from accessing principle for whatever term you choose.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Strategies to Save

Best Money Savings Apps

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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best mobile apps
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Saving money isn’t always as simple as the oft-prescribed “put it away and don’t touch it” advice makes it seem. With financial concerns constantly tugging at our attention, it can be difficult to find the time and money to save for future goals, events or the unavoidable emergency.

If the savings aren’t there when you need them, you may finance a purchase or cover an emergency with debt like a credit card or personal loan. In a pinch, those tools can be invaluable. But taking on debt should generally be considered a last resort, as carrying debt comes with its own risks.

Luckily for the tech-savvy, the fintech revolution gave rise to several mobile apps designed to help you save money — and make saving a bit more interesting, to boot. Read on to discover the best money savings apps to help you save for short term goals like a vacation, long term goals like a home or college education, and pad your all-too-important emergency fund.

Best money savings apps to help you save daily

Consistency is the root of wealth-building. That said, it follows that saving a little bit of money every single day can be a good practice to start building a wealth mentality. It also happens to be a great way to save money without feeling drastically penalized today to serve your future goals, since you can split your saving into small chunk sand meet targeted saving goals. The following money savings apps can help you get into the habit of saving a little bit of money every day.

Best for saving money on a tight budget: Joy

App Store: 4.3/5, Google Play: n/a
If you’re on a tight budget, the Joy app may be a great way to find money you didn’t think you had.

This free iOS app analyzes your income and spending habits and calculates how much money you can safely save each day without breaking your budget. The Joy app won’t automatically make the transfer for you, so you’ll have to open up the app and decide whether or not to save the money. If you say yes, the funds will be transferred from your linked account to an FDIC-insured Joy savings account.

You can also elect to save more or less than the amount suggested, as you can move money into your Joy savings account anytime. If you need a reminder, set up a daily notification to remind you to make the transfer.

When you’re ready to spend your savings, you can transfer the funds from the Joy savings account to an external account.

Another popular app, Digit, deserves honorable mention. Digit calculates how much you can save each day and will make the transfer for you, automatically — however, Digit costs $2.99, so it may not be a viable option for those on a tight budget.

Best for saving up an emergency fund: Chime Banking

App Store: 4.7/5, Google Play: 4.4/5
Standard financial advice suggests keeping three to six months worth of monthly expenses stashed away in an emergency fund, just in case you run into a financial emergency. In reality, however, around 40% of Americans report they aren’t able to cover a $400 emergency out-of-pocket, while the average U.S. monthly household expenditure is about $5,005.

Chime, a mobile-only bank, hopes its app’s automatic savings features may just help you beat the status quo and make it a little less painful to finally build up your emergency fund. The Chime app is free and available for both iOS and Android devices.

When you enroll in direct deposit and Save When You Get Paid, Chime will automatically transfer 10% of each paycheck into a seperate Chime savings account for you. If you’re enrolled in Chime’s automatic savings program, the bank will also automatically round up each transaction made with your Chime Visa debit card and deposit the amount into your savings account, too.

Best for saving money for a vacation: Tip Yourself

App Store: 4.6/5, Google Play: 4.4/5
Tip Yourself is a free app that may help you save for your dream trip. With the Tip Yourself app, available on iOS and Android devices, you can reward yourself for positive behavior by transferring a little bit of money to your digital tip jar each time you accomplish a personal goal.

If you make it to the gym on a Tuesday, for example, tip yourself $1 (or whatever amount you feel you deserve). The same goes for every other personal goal you may have, such as getting to work earlier or calling your parents once a week.

The app aims to help its users build savings habits and motivate them to stay more consistent about their personal goals, too. The app also has a social feed, so you can share your wins — big and small — with your peers in a supportive community. If you’re into maintaining a streak, there is also a calendar that keeps track of the days you did tip yourself.

With Tip Yourself, you can set a savings goal for your next vacation. When you reach your goal, you’ll feel confident taking a vacation knowing the money you’re spending is your reward for keeping the promises you made to yourself.

Best money savings apps to help you save monthly

Saving money on a monthly basis for large goals doesn’t have to come down to what’s left over at the end of the month. And it won’t, if any of the following money savings apps have anything to do with it. The apps below encourage users to set aside the funds when they have them, before the money is absorbed into their monthly expenses.

Best for saving money for a car: Qapital

App Store: 4.8/5, Google Play: 4.5/5
A car is a fairly large savings goal to meet, but it can seem less daunting if you can save a bit toward your vehicle each time you are reminded why you need the car in the first place — that’s where Qapital comes in.

With Qapital, you can set customizable autosave rules for just about anything, so you can save money simply with the actions you take living your life. You can set a custom rule; for example, you can save a certain amount of money each time you pay for a public transit ticket or fill up the tank for that friend who drives you to work.

Qapital has a bunch of other ways to help you save up for a car, too. With the round up rule, the app will round up all of your transactions and automatically transfer the difference to your designated goal account. So each time you pay for anything, you will have a little bit of money going toward your car. The spend less rule saves whenever you spend less than a certain amount with a retailer or in a certain spending category, and the guilty pleasure rule saves a certain amount whenever you spend on a chosen guilty pleasure, like ordering takeout.

When your goal is funded, you can withdraw the funds and spend it on your chosen vehicle. The free Qapital app is available for both iOS and Android devices.

Best for saving money for a child’s future: Kidfund

App Store: 4.8/5, Google Play: n/a
Whatever your child’s future holds, having the money on hand to help them accomplish their goals will come in handy. With Kidfund, not only can you contribute to your child’s future success, but so can your family, friends and anyone who supports your child’s dreams.

You can open a dedicated savings account for each of your children and set a rule to gift money to your child’s account on a periodic basis. For example, you can gift each of your children’s Kidfund accounts $20 each month. Kidfund awards interest based on the balance within the account.

On top of your giving, you can invite your friends and family members to follow your child’s Kidfund account and they can gift money to the account for birthdays, holidays or whatever reason. When the time comes, you’ll have the money waiting in the Kidfund account to fund your child’s dreams.

Kidfund is a free social savings app available only on iOS devices.

Best for saving money for the holidays: Simple

App Store: 3.8/5, Google Play: 4.2/5
Simple is a mobile-first bank that helps you set aside money for future goals. With a fee-free Simple account, you can set and fund financial goals with a target date. Simple will then calculate how much money you need to transfer periodically to reach your goal by your specified target date, based on the frequency you set.

For example, you can set a goal to save $500 for holiday shopping over 10 months and set the frequency to transfer an amount each month. Simple will automatically set aside $50 each month so you’ll reach your goal for the holidays.

The money for the goal will remain in your Simple account, but will be set aside and tagged for that specific purpose. The amount designated toward the goal will be deducted from your total to give show you how much money is safe for you to spend. The Simple app is free and available on iOS and Android devices.

Best money savings apps to help you save in the long term

Saving for long-term goals can be difficult when you can’t see the tangible results of your efforts just yet. Using one of the money savings apps below may help you keep track of the progress made toward your savings goal, so you can stay motivated as you wait, save and watch the investment you are making towards your future grow with time.

Best for saving money for a house: Rize

App Store: 4.2/5, Google Play: 3.7/5
Rize is a free automatic savings app available for both iOS and Android devices. It helps you earn extra money on your savings for a long-term goal (like a home down payment) and offers a high APY on your cash savings. You also have the option to earn even more on your savings by investing the funds. You set a goal amount and how often you want Rize to pull a specified amount of money from your account, and the app will do the rest of the work for you.

You can set investment or cash savings goals. The money saved in a Rize account earns interest on cash savings. If you choose to invest your money, it’s put into exchange-traded funds which earn varying interest rates.

Rize doesn’t charge any fees on your cash savings or require a minimum amount to open an account; instead, it lets you decide how much you want to pay. If you invest your money, Rize asks you contribute a minimum $2 per month to your account and pay an annual 0.25% management fee of your invested assets.

Rize also has a few built-in features to help you reach your goal a bit faster. It calls the features “Power Ups,” and you can turn them on or off at any time. You can use the Accelerate feature to automatically increase your contribution by 1% each month. So if you are saving $100 toward your down payment this month, Rize will increase your contribution to $101 the next month.

Rize also has a Boost feature that calculates how much extra money you have based on your income and spending habits, and automatically transfers up to $5 to your goal whenever “it makes sense,” which Rize says is about once or twice a week.

Best for saving money for college: Clarity Money

App Store: 4.7/5, Google Play: 4.1/5
Clarity Money is a free automatic budgeting and savings app available for both iOS and Android devices. The app helps you save by setting rules for how often and how much you want Clarity to automatically stash away for goals, like paying for next semester’s tuition or funding your child’s college savings account.

Clarity Money also has a few other features that may help you find more money in your budget to save for school fees. The app can analyze your expenses to find where you may be able to cut back on subscription services and free up some of your funds. Its budgeting features display your spending habits and let you know when you are going over your intended budget in a category, so you can adjust your spending behavior before you overspend. Clarity Money does not charge any fees for its services.

Best for saving money for retirement: Acorns

App Store: 4.7/5, Google Play: 4.3/5
Acorns is an investing app popular for letting its users invest the spare change from their daily transactions with its Acorns Core option. With Acorns Core, the app automatically rounds up your transactions to the nearest dollar and invests the difference into your chosen investment portfolios (once you’ve reached a minimum $5 in roundup savings).

Acorns also has a retirement savings feature called Acorns Later. With Acorns Later, you can invest your money in an Independent Retirement Account (IRA) and set recurring contributions from your linked account. You can invest using a Roth IRA, Traditional IRA or SEP IRA. The ETFs in your investment portfolio will automatically adjust to fit your needs over time based on your retirement date and goals. You can’t have Acorns Later without have Acorns Core, and having both costs the user $2 per month. Acorns Core only is $1 per month.

The Acorns app is free and available for both Android and iOS devices, but the Acorns service costs $1, $2, or $3 (with the Acorns Spend checking account) per month depending on what plan you select.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Earning Interest, Reviews, Strategies to Save

Review of Live Oak Bank’s Deposit Rates

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Live Oak Bank’s savings account

When it comes to the savings accounts with the highest interest rates, Live Oak Bank is up there with the best.

APY

Minimum Opening Deposit

1.35%

No minimum

  • Minimum opening deposit: $0
  • Monthly account maintenance fee: $0
  • ATM fees: None
  • ATM fee refunds: None

Live Oak Bank has one of the best savings account rates available listed on our site. The bank is lowering the bar for entry into the high-yield savings account space with a monthly maintenance fee and minimum deposit of zero — for both. Allowing anyone to take advantage of these high interest rates, no matter how much money they have, certainly makes Live Oak Bank stand out amongst competitors that require much higher initial investments.

Live Oak Bank wants you to use your savings account, and use it often, which is one reason why it has no monthly maintenance fee. If there is no activity on your account for 24 months and your balance is less than $10.01, Live Oak Bank will take the remainder of your balance as a Dormant Account Fee and close your account, so keep up-to-date with transactions. One way to do this is setting up automatic withdrawals to ensure you never incur this penalty.

Getting money into a Live Oak Bank savings account from an external bank account can take a little bit of time, depending on how you do it. If you request the money through Live Oak Bank’s online portal, the funds won’t be available for up to five or six business days. But if you send the money to Live Oak Bank from your current bank, the money will be available as soon as it’s received. Your Live Oak Bank savings account will start earning interest as soon as the money posts to your account.

You can easily withdraw your money at any time via an Automated Clearing House (ACH) transfer. Simply log into your Live Oak Bank savings account and transfer the money electronically to any bank account you wish. The funds will be available in two to three business days.

You are limited to making just six withdrawals per month from this savings account. That’s not a Live Oak Bank thing, Federal law mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle. If you can’t wait until the next month to make a withdrawal beyond the six per month, you’ll be charged a $10 transaction fee for each additional action from the bank.

Live Oak Bank CD rates

Live Oak Bank also has some of the best rates on certificates of deposit (CDs).

Term

APY

Minimum Opening Deposit

6-month CD

1.10%

$2,500

1-year CD

1.35%

$2,500

18-month CD

1.35%

$2,500

2-year CD

1.35%

$2,500

3-year CD

1.30%

$2,500

4-year CD

1.30%

$2,500

5-year CD

1.30%

$2,500

  • Minimum opening deposit: $2,500
  • Early withdrawal penalty:
    • CD terms that are less than 24 months — 90 days’ interest penalty
    • CD terms that are more than 24 months — 180 days’ interest penalty

Live Oak Bank consistently offers some of the highest CD rates listed on our site. This bank’s minimum deposit requirements also seem to be right on par with other banks’ requirements. At the time of publishing this article, the best CDs out there have minimum deposit requirements both above and below Live Oak Bank’s $2,500 benchmark.

It’s a relatively straightforward process to open a CD. Simply complete the forms online, provide any needed documentation (such as your current bank account details), and wait for an account approval. Once your account is open, you can transfer your deposit, where it will be held for five days before officially launching your CD. It’s important to note that only U.S. citizens and permanent residents are eligible to open these accounts.

If you are able to resist the urge to withdraw your money early, congratulations! Your CD will automatically renew into a CD with the same term length. However, don’t panic if that’s not what you want: You have up to 10 days after the CD has matured to withdraw your money penalty-free and move it to another bank account.

If you need to withdraw your deposit early, you’ll incur a penalty. If your original CD term was for less than 24 months, you’ll be charged 90 days’ worth of interest. If your original CD term was for longer, you’ll be charged a higher rate — 180 days’ worth of interest.

Conclusion

Live Oak carries an “A” health rating according to our analysis and has a top-notch online banking portal as well as a streamlined app. It’s easy to overlook Live Oak Bank for other larger, more established consumer banks like Ally Bank or Discover Bank. That might be considered hasty, as Live Oak has some of the best CD rates around and one of the best savings accounts available on the market based on our site.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.