What is a bank account?
Short answer
A bank account is an account at a bank or credit union that holds your money, so you can deposit it and take it out. The main types are checking, for everyday payments, and savings, for money set aside. At an FDIC-insured bank, deposits are insured up to $250,000 per depositor, per bank, per ownership category.
By Alex Thomas · Founder of ITIN Club
Updated
How a bank account works
When you put money in a bank, that's a deposit, says the FDIC. The bank keeps it safe until you take it out with a debit card, a check, an ATM, a transfer or an app. Credit unions offer the same checking and savings accounts, notes consumer.gov.
Most accounts come with:
- A debit card that spends straight from your balance
- Direct deposit, so your pay arrives electronically
- Online and mobile banking to check your balance, pay bills and, at some banks, deposit a check by photo
The main types
The FDIC lists four kinds of deposit account:
| Account | What it's for | How it works |
|---|---|---|
| Checking | Everyday spending and bills | Built for frequent deposits and withdrawals. May earn interest |
| Savings | Money you don't need regularly | Holds money for the future. Some pay a small amount of interest |
| Certificate of deposit (CD) | Money you can lock away | Fixed term, often three months to five years or more. Early withdrawal usually costs a penalty |
| Money market account | Larger savings | Usually a higher rate and a higher minimum balance, with no fixed term |
How your money is protected
FDIC insurance covers checking, savings, CDs and money market deposit accounts at an insured bank if the bank fails. The limit is $250,000 per depositor, per bank, for each ownership category, such as single or joint. It doesn't cover stocks, bonds, crypto or safe deposit boxes. At a federally insured credit union, the NCUA gives the same $250,000 coverage.
Federal rules also protect you day to day:
- Overdraft fees. A bank can't charge one on ATM or debit card transactions unless you opted in first.
- Lost debit card. Report it within two days and your loss is capped at $50. Wait longer and it can reach $500.
- Fees in writing. Banks must disclose fees and interest rates when you open the account and when terms change.
Want the full picture?
How to open a US bank account as a non-resident
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