In the US, there are four major types of banking accounts that you can open at banks or credit unions. Each type of has its own benefits and differences –

 

  • Checking Account: This account comes with a debit card and checks and is generally used for everyday spending, such as groceries, bills, and rent. Banks offer lower interest rates on a checking account and in exchange provide unlimited withdrawals and transfers. In order to maintain this account, it’s important to ask about the requirements of each bank – most will ask for a monthly deposit or a minimum balance.
  • Savings Account:  This account has a higher interest rate than a checking account and is better for money saved for future use, such as money to be used for a car purchase or paying for school. Once you put money into a savings account, we recommend withdrawing money only when you need it. This will help you earn more interest, and most banks will charge a fee if you withdraw too many times a month.
  • Brokerage Account: This account is also known as an investment account because it allows you to buy investments that include stocks, mutual funds, bonds and ETFs. If you want to grow your wealth and are seeking higher returns than a savings account, then you can consider opening this type of account. However, with investing there is always the risk that you will lose money, and you will generally need to pay a capital gains tax when you sell your investment.
  • Individual Retirement Account (IRA): This account helps you set aside money to be used during retirement and should only be withdrawn after a certain age. With a retirement account, you can not only invest your money but also save on taxes through the money you contribute to the account. Most people choose either a Traditional IRA or Roth IRA, which differs in when tax is deducted and collected.

If you want more information on which bank to choose when opening an account, check out this article here: Best banks to open a bank account as a foreigner