What is a Bank Account? A Super Simple Explanation

What is a bank account?

When you want to keep your money in a bank, you open an account in your name with the bank. This way, the bank can tell that the money belongs to you.

You deposit money into the bank account when you want to add money, and withdraw money from the bank account when you need to use it.

Why would I use a bank account?

A bank account is a great place to store your money safely. You can use your bank account for saving money for large purchases, making payments using a debit card or by writing checks, paying bills online, and more.

How safe is the money in a bank account?

Most banks are FDIC insured. If you open a bank account with an FDIC-insured bank, your money is 100% safe up to $250,000 – you would not lose it even if the bank closes down or goes bankrupt.

Are there different types of bank accounts?

There are mainly two types of bank accounts.

  1. Checking accounts, which pay very little or no interest, and are used for day-to-day transactions like writing checks, bill payments, etc.
  2. Savings accounts, which pay a higher rate of interest, and are used for saving up money for the future.

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