First-timer’s guide to savings account alternatives

If you’re looking to earn more interest with your savings account or to create a long-term savings vehicle, one of these alternative accounts might be right for you.

Tags: Accounts, Banking basics, Savings
Published: February 13, 2019

You probably have a basic familiarity with savings accounts. Maybe you opened one as a teenager to save birthday checks from grandma or wages from a babysitting or lawn mowing job. Or maybe you didn’t open one until you started working full time as a young adult. Either way, most of us understand the need to have a convenient, safe place to save money – the standard passbook savings accounts offered by banks. These accounts offer easy access to your money, and are insured for up to $250,000 at FDIC-insured banks.

As you amass larger amounts, however, you may want options to earn more interest or create a long-term savings vehicle. That’s where these saving account alternatives come in.


Certificate of Deposit

In a nutshell: A certificate of deposit (CD) is a time deposit, or time account. You leave money in it for a set period until it reaches its maturity date. When that happens, you can withdraw the money, or renew and leave it in the account. The amount of time CDs take to mature can range from a month to five years.

Keep in mind: You can take money out of a CD before its maturity date, but you’ll have to pay a penalty. Most banks, including U.S. Bank, require you to have $500 or $1,000 minimum to open a certificate of deposit, but it may vary.

Advantage: Given the restrictive rules associated with CDs, why open one? CD interest rates are fixed and higher than what a typical bank savings account pays. Essentially, you give up easy access to your money in exchange for earning a higher interest rate.

How it works: Let’s say you open a CD with $1,000 for a two-year period with a two percent interest rate, compounded annually. After a year, you’ll have $1,020, and after two years, a little more than $1,040. At two years, you have the option to withdraw your money without paying a penalty. Or, you might decide to extend the account for another two-year term, letting the money continue to accrue interest.

As with regular savings accounts, if your money is in an FDIC-insured bank, your accounts will be insured for up to $250,000. (That’s the total insurance for all accounts per depositor).


Money Market Account

In a nutshell: Money market accounts are like a combination checking and savings account. You can write checks from them, transfer funds to your checking account and take out money without penalties.

Keep in mind: Be aware that there is a six-transaction limit per account cycle (monthly). Going over that limit may result in the bank charging you a fee or even closing your account. Still, some types of transactions (such as those at an ATM or in-person) don’t count against the limit, so it’s not as restrictive as it initially seems.

Your bank may require a minimum deposit for you to open a money market account. It may also charge a monthly maintenance fee, but if you keep a required minimum balance in the account or have other accounts with the same institution, it might be waived.

Advantage: Similar to CDs, a money market account may have higher interest rates than a regular savings account. Typically, rates bump up in tiers.

How it works: If you have under $10,000 in your account, you might earn an interest rate of 0.04%. But if you saved enough for the $10,000-$24,999 tier, your interest rate could be set at 0.05%.

As with other FDIC-insured banks, funds you keep in a money market account are insured, up to $250,000 for a person’s total amount of deposits in one institution.


It’s good to know that you have options. Ready to save? Find the right U.S. Bank savings account for you.