SoFi

It’s no secret that banks appreciate affluent depositors and their high account balances. To attract and keep these wealthy customers, many banks and credit unions have established premium banking services, also known as premier banking.

Premium banking typically brings high-dollar clients a suite of benefits such as higher savings yields, waived account fees, dedicated customer service, and no-charge ATM access.

If your balance is big enough, you can receive extra privileges and services. Here’s what to know if you’re looking to pursue deluxe status.

What Are Premium Banking Services?

Premium banking services are elite privileges that a bank extends to its loyal and financially comfortable customers. The benefits often center on a rewards checking account paired with a rewards savings account; qualified customers may also receive exclusive deals on bank credit cards or loans.

Amenities may include:

•   Dedicated personal bankers

•   Investment consultations

•   Lower fees for other financial products within the same bank or credit union

•   Higher annual percentage yields (APYs) on savings accounts

•   Reduced annual percentage rates (APRs) on loans

•   Increased daily or weekly limits for withdrawals, purchases, and money transfers

•   Free or low-cost wire transfers

•   Overdraft protection

•   Rewards credit cards

•   ATM fee reimbursements

How Does Premium Banking Work?

As noted above, premium banking enhances services and lowers costs for preferred customers. To qualify for these perks and price breaks, clients generally must keep high average daily balances in their checking and savings accounts; they may also maintain investment accounts and have multiple bank loans.

The required balances vary, but amounts between $10,000 and $15,000 are common. Clients can use the total of their balances from different types of bank accounts to meet these financial requirements.

In exchange, the bank may waive monthly fees, pay higher APYs on savings accounts, and provide discounts on loans. A designated personal banker typically handles the client’s account needs and coordinates perks and services such as credit card bonus offers and free financial consultations.

Types of Premium Banking

The phrase “premium banking” usually refers to upgrades and privileges made available to banks’ affluent or relationship-focused clients. Sometimes, though, the term has a broader meaning. It may encompass the top-tier services of private banking and wealth management for depositors with high or ultra-high net worth.

Premium Banking

In brief, premium banking typically bundles premium checking accounts and savings accounts with loans, mortgages, or other financial products. Clients enjoy discounted loan APRs or lower fees across the board due to their many connections to the bank.

If a high-yield savings account is part of the premium banking package, it’s likely to have an amped-up APY and few or no fees.

There may also be other special deals, including enhanced credit card rewards.

Banks generally assign dedicated financial officers to manage relationships with premium clients. Your personal banker can troubleshoot for you and act as a point person for exclusive perks (e.g., airport lounge access when traveling) as well as ordinary bank business like wire transfers or safe deposit box rentals.

Private Banking

A more rarefied version of premium banking is private banking. This type of retail banking caters to wealthy individuals, so minimum balance requirements can be quite steep. Clients may need to maintain average daily balances ranging from $100,000 to $10 million or more, depending on the bank.

Some institutions have established service tiers (such as gold, platinum, or diamond) that reflect the client’s combined balances. As a rule of thumb, the higher the balance, the more exclusive the tier and the more extensive the benefits.

The assistance provided by private bankers can be narrowly focused or expansive. It may include anything from strategizing to maximize credit card rewards for lavish travel to facilitating a jumbo mortgage to setting up a financial plan.

Wealth Management

Wealth management can be seen as an extension of private banking, so the two are sometimes marketed together to high net worth and ultra-high net worth individuals. In addition, wealth management professionals may work with private family trusts, including those with governing boards.

Wealth management goes beyond banking functions, however. A private banker might help you with various bank accounts, credit cards, and loans, as discussed above. A wealth management specialist would get familiar with all the ins and outs of your financial life in order to advise you on investments, trusts, retirement planning, or estate planning. These issues can be extremely complex, especially for ultra-high net worth clients.

Benefits of Premium Banking Services

Talking and teaming up with a personal banker can be beneficial in itself — and not just for tips on saving or making money. A personal banker can teach an affluent person how to move from being a depositor to being a steward of their wealth.

The banker uses their deeper expertise to give you individually tailored support and guidance. Meanwhile, you can learn from their knowledge and experience.

The banker may also have a network of contacts you can work with on larger issues such as estate planning or tax strategy.

Examples of Premium Banking Services

Premium banking services can include any number of price breaks and lifestyle bonuses. Some familiar examples are:

•   Preferential rates: These could be higher interest rates on savings accounts and certificates of deposit (CDs) or discounts on loans, insurance, mortgages, and lines of credit.

•   Upgraded credit cards: Visa Signature and Mastercard Platinum are examples. Preferred customers can thereby access more advantages of credit cards, such as enhanced rewards, discounts, and travel perks.

•   Global and international banking support: Assistance with currency services and offshore accounts may be available, plus sweeteners such as zero foreign transaction fees and access to emergency cash services.

•   Travel privileges: Premium status may mean priority boarding at airport gates, free lounge access, or rental car discounts.

•   Concierge services: These include assistance with booking travel, making dining reservations, and getting tickets to exclusive events such as SoFi Plus Experiences.

•   Advanced cash management and financial planning: Wealthy customers can sort out complex cash flow issues and, if needed, get professional advice from investment and insurance experts.

•   Waived banking fees: Monthly maintenance charges, out-of-network ATM fees, wire transfer fees, foreign transaction fees, and charges for cashier’s checks or money orders may all be reduced or waived.

Alternatives to Premium Banking Services

Bank customers who don’t have thousands of dollars to park in a checking, savings, or investment account can still score better loan APRs, fewer fees, or specific financial benefits if they’re willing to cast a wider net.

•   Credit unions: For comparatively low loan rates and fewer fees, some people consider credit unions. They offer many of the same in-person services as traditional banks, and customer deposits are federally insured by the National Credit Union Administration.

•   Online banks: These banks typically have lower overhead costs because they operate entirely online. Customers may not mind the lack of physical branches if their bank saves them money on fees and gives them higher APYs on savings and checking accounts. Like traditional bank accounts, online bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC). Some online institutions also give you access to premium banking perks through membership programs such as SoFi Plus.

•   Financial technology (fintech) firms: For convenience, cash-back rewards, fewer monthly fees (e.g., fee-free overdraft coverage), and digital features such as budgeting tools, you might want to look into fintech options. These companies partner with traditional banks to provide app-based financial services along with FDIC insurance for customer accounts.

•   Brokerages: Financial giants such as Fidelity and Schwab offer cash management accounts that function like checking accounts but often provide better interest rates. That’s because these accounts keep a customer’s uninvested cash in money market funds. A brokerage account can work well for people who want to consolidate their investments and banking in one place.

•   Community banks: These local institutions focus on the needs of the communities they serve. They provide personalized service and a full range of banking products, often balancing the friendly feel of a credit union with the features of a traditional bank.

In weighing these and other options, it’s important to consider your specific needs. A credit union or community bank may be a good fit, for example, if you particularly want in-person support. Online banks or brokerage cash management accounts could be appropriate if high interest on savings is a priority.

Premium Banking Tips

•   Strategizing your spending — with or without guidance from your personal banker — could help you unlock additional value. For example, if you have augmented credit card points, exchanging them for cash often gives you the worst conversion rate. A banker might note that using those points for travel could get you a lot farther.

•   Get familiar with the less splashy perks that go along with your accounts. Examples might include early credit for direct deposits or transfer fee waivers.

•   If premium plastic is one of your benefits, you’ll want to stay current on relevant credit card rules, as some perks may be limited-time-only or have stringent terms and conditions.

•   Use your banker to coordinate with tax, legal, and investment specialists within the bank. Not only will this ensure that you get cohesive advice, but it should also save you time and effort.

The Takeaway

Premium banking offers affluent customers enhanced services, privileges, and perks. To qualify, customers usually must maintain very high average daily balances across their accounts; in exchange, they get added convenience and savings. Three common benefits are waived fees, higher savings rates, and free consultations with a dedicated personal banker.

FAQ

What is the meaning of premium banking?

The phrase “premium banking” refers to special account benefits and personalized financial services for high net worth individuals. These may include consultations with dedicated relationship managers, wealth management assistance, investment advice, and account perks like waived fees and better loan rates.

Is premium banking worth it?

The answer depends on your assets and your lifestyle. If you can easily maintain the necessary minimum balances or if you use multiple services from the same bank (such as loans, credit cards, and investments), the convenience and perks of premium banking may be worth the costs. Other customers may find that, for them, premium banking’s particular benefits don’t warrant the high fees or balance requirements.

What does a premium bank account mean?

A premium bank account is a bank account that offers extra features such as higher interest on deposits, discounts on loans, low or no fees on many transactions, and dedicated support from a personal banker. It’s generally marketed to customers who can maintain substantial balances or who contract for multiple bank products and services.

What are the four types of bank accounts?

The four types of customer accounts that are available at a bank or credit union are:

•   Checking accounts: This essential account provides quick access to funds for everyday spending and transactions.

•   Savings accounts: People often use this type of account to store money for emergencies and short-term goals while earning interest. High-yield savings accounts are widely available.

•   Certificates of deposit (CDs): This is a more constrained form of savings account in which customers lock up funds for a set period of time in exchange for fixed interest rates and guaranteed returns. Credit unions’ version of a CD is called a share certificate.

•   Money market accounts (MMAs): This type of savings account combines higher interest rates with checking account features.

What are the advantages of a premium bank account?

Common advantages of premium bank accounts include waived or reduced fees (e.g., for ATM use or overdrafts), higher APYs on savings account balances, lower rates on loans, and complimentary perks such as priority customer service, financial planning consultations, travel benefits, or identity theft protection.

Photo credit: iStock/fizkes

SoFi Plus: SoFi Plus is a premium membership that gives members access to our best rewards, benefits, and more when they pay the SoFi Plus Subscription Fee. Between 12/9/25–3/30/26, members with Eligible Direct Deposit or Qualifying Deposits will receive complimentary access to SoFi Plus. Benefits are subject to change and may not be available to everyone. All terms and conditions applicable to the use of SoFi Plus apply. To learn more about SoFi Plus and available benefits and terms, please see the SoFi Plus page.

*Based on a series of blinded surveys of financial memberships across banking, borrowing, investing, and credit cards. A nationally representative sample of 900 consumers were asked to rank offerings based on the question “Which financial membership brand is most rewarding?” Results as of January 2025. See sofi.com/plus-survey for details.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Invest®

SOMB-Q425-013

From airlines to banks to retailers, many of the best-known companies now offer loyalty programs. The details of these programs vary widely, but they all serve the same purpose: to attract new followers and reward repeat customers with special membership perks.

Since membership rewards programs are so widespread, it’s worth understanding how they work. Here’s an overview.

What Are Membership Rewards?

Membership rewards are incentives that a company offers its customers as encouragement to use its products or services again and again.

Companies find membership rewards systems—known as loyalty programs—to be effective in identifying, wooing, and keeping customers. In fact, the vast majority (85%) of consumers say loyalty programs make them more likely to continue shopping with those brands.

Some loyalty programs are free, while others charge their members a subscription fee. A membership subscription to SoFi Plus, for example, costs $10 a month to subscribe, or you can qualify for complimentary membership through eligible direct deposit or qualifying deposits through March 2026.¹

Many loyalty programs have membership tiers or status levels. Members who qualify for a higher tier can access more valuable rewards. To ascend to those tiers, however, a member may have to earn a certain number of rewards points, pay higher fees, or both.

How Do Membership Rewards Work?

Despite their many variations, membership rewards programs are all fundamentally similar. The core principle is simple. Consumers enroll in loyalty programs to gain rewards, which they earn by accumulating rewards points.

Members can typically rack up rewards points by taking actions: making purchases, referring friends, engaging with online events, and so on. Those who earn a given number of rewards points can trade them for benefits as set out in the membership agreement. (We’ll touch on specific benefits later in this article.)

Aside from points, members may also qualify for cash back rewards or discounts on merchandise or services. Premium membership tiers—possibly requiring a higher fee—may give them access to special benefits such as free shipping or priority service.

Credit cards in particular emphasize loyalty programs. Cardholders can gain credit card points by spending a specified amount of money each month or quarter.

And opportunities to earn points are easy to find. Members can pile up points by using a rewards credit card regularly for shopping, dining out, travel costs, household expenses, and other things.

Some people try to game the membership rewards system by credit card churning. Churning involves opening a credit card account to snag sign-up rewards and then promptly closing it. The practice isn’t illegal, but it is risky. Not only could multiple hard credit pulls in a short time be harmful to your credit score, but also, issuers are likely to deny future card applications if you’ve opened too many accounts in the last year or two.

Recommended: 10 Credit Card Rules You Should Know

Benefits of Membership Rewards Programs

Rewards programs don’t work unless they can attract and hold members. So the benefits need to be noteworthy, useful, and not too hard to earn.

For example, the SoFi Plus Smart Card rewards users with points equal to 5% cash back rewards² on money spent at grocery stores.

In general, an easy way to earn points is through credit card bonus offers to newcomers or big spenders. For instance, Discover gives new cardholders double the cash back they’ve earned during their first year.

An advantage of credit cards that are affiliated with airlines or hotels is that rewards points can often be converted to airline miles. An abundance of miles can often be redeemed for deals on flights, hotels, or vacation packages, strong incentives for the avid traveler.

People who choose cash back rewards points can use them to reduce their outstanding account balance. The value of the points will generally show up as an account statement credit.

Other benefits you can get with a membership subscription or credit card rewards might include discounts, gift cards, free merchandise, members-only content, early access to new products, or perks like free shipping.

In some cases, just being a member of a loyalty program gives you access to certain benefits. For example, SoFi Plus members are eligible to take part in SoFi Plus Experiences. Among the awards are VIP access to NFL and NBA games, concert tickets, and passes to music festivals.

Examples of Membership Rewards Programs

The countless membership rewards programs out there offer a universe of benefits. Here are several familiar variations.

Frequent flyer miles are a familiar type of membership rewards program. Members accumulate miles they can redeem for award tickets, upgrades to business or first class, free wifi, and more.

Some banks feature rewards checking accounts. (As of this writing, SoFi does not.) Account holders who meet certain conditions—such as direct deposit amounts, a defined average balance, or a minimum number of transactions—may get cash back, fee reimbursements, shopping discounts, or points you can convert to airline miles.

SoFi Plus is a paid rewards program for customers of SoFi Bank. The program provides qualifying members with extras that range from cash back and deposit matching to higher interest rates on savings accounts and professional financial planning sessions.

In another example, cosmetics retailer Sephora sponsors the Beauty Insider program, with its Insider, VIB, and Rouge tiers. Members earn points by making purchases. In return for their loyalty, they may receive trial-sized product samples, birthday gift sets, free shipping, and more.

Amazon Prime, which doesn’t issue rewards points, shows there can be a difference between subscriptions and membership. Subscribers who pay the $14.99 per month (or $139 per year) can enjoy convenience bonuses for shoppers, free fast shipping, unlimited photo storage, grocery discounts, low-cost prescriptions, and access to extensive video, audiobook, and music libraries. Additional monthly fees unlock further benefits. By contrast, membership loyalty programs foster engagement and connection among people with similar interests.

Ways to Earn Membership Rewards

After you’ve become a member of a brand, card, or store, the obvious way to earn rewards points is by making purchases in those domains. But you may find that the loyalty program offers other, more creative ways to earn rewards, such as:

•   Check-ins that give you points just for visiting the store

•   Providing personal details so that the program has a profile of you

•   Signing up for the brand’s newsletter

•   Boosting the brand’s social media presence by reposting or sharing its content

•   Reviewing products or taking surveys

•   Referring new customers who sign up or make a purchase

•   Attending members-only events or workshops

•   Doing gamified tasks that award you points or point multipliers

If you have signed up for the newsletter or subscribed to the company’s social media feed, you’ll very likely be informed about additional ways to earn rewards.

Membership Rewards Tips

•   Make sure you understand the program’s rules. To maximize credit card rewards, read through all the promotional materials for your loyalty program. You may find that it awards points for actions you hadn’t thought of.

•   Track your progress. Check in regularly to the program’s tracker app or a dedicated website to see your points tally and your progress toward premium tiers.

•   Learn new ways to earn points. You may find that you can pick up rewards points or bonuses by referring new members, reviewing products, providing survey feedback, participating in social media, or something else. Your program should keep you posted on promotional offers.

•   Keep track of expiration dates. Be sure to use accumulated rewards points before they expire.

•   Find out the easiest way to redeem rewards points. Your program will have instructions and conditions for redeeming your rewards points. You may be able to do this through a dedicated app, account page, or website portal.

•   Don’t settle for rewards you don’t care about. Instead, aim to redeem rewards points for something you actually want. This may be cash back, product discounts, or access to exclusive events such as SoFi Plus Experiences. Small perks like product samples or free delivery may be easier to earn.

The Takeaway

Membership rewards programs operate by encouraging members to accumulate points through various actions—such as making purchases or referrals—which can then be redeemed for valuable benefits such as cash back, discounts, travel miles, or exclusive experiences. Members who opt for non-cash rewards frequently get more purchasing power for their points than they’d have with cash back.

FAQ

What is the difference between subscription and membership?

In general, subscriptions offer continuous access to products or services for a recurring fee. Examples might include streaming video or meal kits. After you subscribe, you typically don’t earn points or rewards for taking any particular action.

Membership programs, by contrast, tend to incorporate loyalty features. These might be rewards for repeat purchases (e.g., buy nine sandwiches and the tenth one is free), premium tiers with more valuable awards, gift cards, branded merchandise, or the like.

Do membership rewards expire?

It depends. Some programs may offer lifetime membership points to retain customers. In other cases, points may expire after a set period (such as 12 or 24 months) or on a rolling basis. Sometimes, a member with points about to expire may be able to reactivate them by taking a specified action, such as buying something with a rewards credit card.

What are some creative ways to earn membership rewards?

Depending on your loyalty program, you may be able to score more rewards points through activities such as:

•   Checking in when you visit the store

•   Providing personal details for the program’s profile of you

•   Signing up for the brand’s newsletter

•   Boosting the brand’s visibility on social media by reposting or sharing its content

•   Reviewing products or taking surveys

•   Referring new customers who sign up or make a purchase

•   Attending member-exclusive events or workshops

•   Doing gamified tasks that award you points or point multipliers

The company’s newsletter and social media feed will very likely keep you informed about new ways to earn rewards.

What is the difference between membership rewards and statement credits?

Customers earn their membership rewards, which are delivered in the form of points, cash back, or other perks and privileges. When you redeem those rewards points (or cash), you may decide to apply them to your bank or credit card account to lower its balance. You’ll see the amount recorded on your account statement as a credit.

What are some reasons to choose membership rewards over cash back rewards?

Points redeemed for non-cash rewards typically end up having greater purchasing power than cash back rewards points, according to Experian. Beyond that, it’s a question of lifestyle. Cash back is simple, but you might prefer membership rewards if you:

•   Spend enough on your credit card that the value of the rewards exceeds the annual fee

•   Travel frequently enough that you appreciate benefits like airport lounge access and travel insurance

•   Value elite amenities and upgrades such as business class flights and luxury hotels

•   Don’t mind actively managing your points and overall spending for best results

Naturally, you’ll want to check the loyalty program agreement first for information. It should spell out the value of your rewards points and mention any affiliates with additional benefits.

Photo credit: iStock/FreshSplash

¹SoFi Plus: SoFi Plus is a premium membership that gives members access to our best rewards, benefits, and more when they pay the SoFi Plus Subscription Fee. Between 12/9/25–3/30/26, members with Eligible Direct Deposit or Qualifying Deposits will receive complimentary access to SoFi Plus. Benefits are subject to change and may not be available to everyone. All terms and conditions applicable to the use of SoFi Plus apply. To learn more about SoFi Plus and available benefits and terms, please see the SoFi Plus page.

*Based on a series of blinded surveys of financial memberships across banking, borrowing, investing, and credit cards. A nationally representative sample of 900 consumers were asked to rank offerings based on the question “Which financial membership brand is most rewarding?” Results as of January 2025. See sofi.com/plus-survey for details.

²5% Cash Back Rewards Program
Earn 5% cash back rewards on eligible grocery store purchases with the SoFi Smart Card. Cash back rewards are issued in the form of SoFi Member Rewards points. Members earn 5 points for every dollar spent on eligible grocery store purchases. SoFi, in its sole discretion, determines grocery store eligibility. Superstores like Walmart and Target, warehouse clubs like Costco and Sam’s Club, convenience stores, grocery delivery services, and meal-kit delivery services are not considered grocery stores. This benefit is subject to continued paid SoFi Plus subscription. All terms and conditions applicable to the use of SoFi Member Rewards apply. To learn more about SoFi Member Rewards, please see the SoFi Member Rewards page. No rewards points will be earned with respect to reversed transactions, returned purchases, cash advances, or other similar transactions. SMC_200.0

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Invest®

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If you’re looking to put money aside for future needs and watch it grow, a savings account can be a great option. However, not all savings accounts are created equal. There are actually several different types to choose from, and the best choice for you will depend on your goals, how you want to access your money, and how soon you’ll need it.

If you’re looking for easy, in-person access to your savings, for example, you might like a traditional savings account. If getting a high return is your priority, a high-yield savings account, certificate of deposit (CD), or online bank account may be a better option. There are also speciality accounts for longer-term savings goals like retirement.

Here’s the lowdown on the different types of savings accounts to have and how to choose the best one (or ones) for your needs.

Common Types of Savings Accounts

When you’re choosing between the different types of savings accounts, it’s helpful to understand how they work. While there are many differences between the accounts listed below, one thing they generally have in common is access to online banking. According to SoFi’s April 2024 Banking Survey of 500 U.S. adults, 48% of survey respondents use online banking daily, and 26% use it several times a week.

Traditional Savings Account

Many people start their savings journey by opening a traditional savings account at the same bank where they have a checking account. SoFi’s data found that 71% of respondents with a bank account have a savings account.

If your bank is insured by the Federal Deposit Insurance Corporation (FDIC), then your deposits are insured for up to $250,000 per depositor, per account category, per insured institution. The National Credit Union Administration (NCUA) provides similar insurance for credit unions.

You can typically open a basic savings account with a small minimum deposit. And, while the interest rates on these accounts tend to be low compared to other savings options, they offer fairly easy access to your funds. Just keep in mind that some institutions limit “convenient” transactions (those made by check, debit card, or online) on savings accounts to six per month, and will charge a fee if you exceed the limit. However, there are generally no restrictions on the number of in-person withdrawals and transfers (at the teller or ATM) you can make on a basic savings account.

Online Savings Account

Brick–and–mortar financial institutions aren’t the only place where you can shop for a savings account. If you’re comfortable doing your banking online or from your mobile device, you might consider an online bank for your savings account.

Because online-only financial institutions tend to have lower overhead costs than traditional banks, they often pass that savings on to customers in the form of higher interest rates and lower, or no, fees.

While you can’t meet with a bank representative face-to-face, these accounts often come with well-designed and user-friendly websites and mobile apps, along with customer service representatives available via online chat and by phone.

Like basic savings accounts, online savings accounts may have restrictions on the number of transactions you can make per month without incurring a penalty fee.

If you choose an online savings account from an institution with FDIC insurance, then your funds will be protected, even if the online bank were to go out of business.

High-Yield Savings Account

Also known as high-interest savings accounts, this type of savings vehicle tends to come with higher interest rates than traditional savings accounts and often lower fees. They are primarily offered by online-focused banks and credit unions and, as a result, some consumers aren’t aware they exist. According to SoFi’s survey, just 59% of adults know what a high-yield savings account is and only 23% have one.

Depending on the financial institution, a high-yield savings account will likely be insured by the FDIC or NCUA up to $250,000 per depositor, per account category, per insured institution, or possibly more.

Like other savings accounts, withdrawals from high-yield savings accounts may be limited to six per month, and going over the withdrawal limit may trigger a fee. Of the 55% of people in SoFi’s survey who say they have switched banks, 29% did so because they wanted lower fees.

Learn more: Basics of High Yield Savings Accounts

Money Market Account

A money market account (MMA) is a type of savings account that also offers some of the features of a checking account. Like a regular savings account, MMAs pay interest on your balance (often at a higher rate than a traditional savings account). Like a checking account, MMAs offer checking-writing privileges and/or debit cards, making it easy to access your funds.

On the downside, money market funds generally require a much larger initial deposit than a basic savings account. And, you could be charged fees if the balance goes below a minimum amount.

Due to the potentially higher interest rates and check-writing/debit access, money market accounts can be a good choice for emergency funds if you’ve already saved enough to meet the initial deposit.

It can be important to know the distinction between money market accounts vs. money market funds, too. The latter is a type of investment account and not guaranteed by the FDIC or NCUA.

Certificate of Deposit (CD)

Certificates of deposit, or CDs, can be a good savings tool if you don’t need quick access to your money. This type of savings account comes with a specific term — often between three months and five years — during which you need to keep your money in the account.

In return for leaving your money untouched for that time period, CDs generally offer higher returns than standard savings accounts. Generally, the longer term, the higher the interest rate — but that is not always the case.

While savings and money market accounts pay variable interest rates (meaning your rate can change after you’ve opened the account) CDs typically pay fixed rates, so your rate is likely to be locked in once you’ve deposited the cash. You’ll know these funds are safe if they’re FDIC-insured. However, if you pull your cash before the maturity date, you will usually pay a penalty, which might mean losing any interest earned. (There are some no-penalty CDs, but the interest rate is probably lower than you’d otherwise earn.)

Cash Management Account

A cash management account (CMA) is an interest-bearing account that is usually offered by a brokerage firm, an investment firm, or a robo-advisor. These accounts typically combine the features of a savings account, checking account, and (in some cases) a brokerage account. Though they are not held by banks, they may be insured by the FDIC via a partner bank. Not all are, so be sure to check if you are thinking of opening one.

CMAs may offer higher interest rates than traditional savings accounts, along with check-writing privileges and a debit card. CMAs also typically provide easy transfers to brokerage accounts, where you can invest your funds. Keep in mind, however, that interest rates may not be as high as what you could earn in a high-yield savings account.

Speciality Savings Plans

The types of savings accounts listed above can be great places to build your emergency fund or save money for a downpayment on a house. But if you’re looking to save for a more specific or longer-term goal, such as retirement or a child’s future education, you may want to open a more specialized account.

Specialty savings accounts are designed to serve a specific financial goal. They can earn interest to help you grow your money, just like other savings accounts. Some of these accounts, however, are investment vehicles, which means they can yield higher returns over the long term, but may also involve some risk.

Among the most common specialty accounts are 529 college savings plans, 401(k)s and individual retirement accounts (IRAs), health savings accounts (HSAs), and custodial accounts for a child (which are savings accounts set up and administered by an adult for a minor).

Opening a specialty savings account can make sense if you have a singular purpose for saving money. You may want to keep in mind, however, that there may be restrictions on when and how you can withdraw those funds later. Some specialty accounts, such as IRAs, 529s and HSAs, have strict tax rules for making withdrawals.

The Takeaway

There are many different types of savings accounts, and the best option for you will likely depend on how and when you want to access your money.

You might like a traditional savings account if you want to bank in person. For better interest rates and lower fees, you might prefer an online high-yield savings account or, if you won’t need the money for a while, a CD.

For more specific savings goals, such as preparing for retirement, covering health expenses, or saving for your child’s education, you may want to open a specialty savings account in addition to a more liquid savings vehicle.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What type of account is best for savings?

There are different kinds of savings accounts that suit different goals and money styles. If you like banking in-person, a traditional bank might work fine. If you prefer the convenience of an online bank, you are likely to be rewarded with higher interest rates and lower fees. If you are saving for a specific goal, a specialty account might work best. For instance, a 529 account can be a good choice if you are stockpiling funds for a child’s future college tuition.

How do I choose a savings account?

Choosing a savings account depends on your needs and goals. If you are looking for an in-person banking relationship, a traditional savings account at a brick-and-mortar bank could work well. If you want a high-yield account and low fees, and don’t plan on making trips to a branch, an online bank’s offerings might better suit your needs. If you’re able to keep your money in an account for a specific time period and want to earn a guaranteed rate, consider a certificate of deposit (CD).

Is it better to have a savings account or invest?

This depends on your goals. A savings account is best for short-term needs and emergencies. These accounts offer safety and easy access, but lower returns. Investing is generally better for long-term goals, since it can offer potentially higher returns over time. However, investing comes with risks, particularly in the short-term. Ideally, you want to have both — a savings account for short-term needs and goals and an investment account to help build future wealth.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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