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There are many reasons why you might want to sock away some cash and perhaps earn interest while you’re at it. Perhaps you’re saving up for a down payment on a house or gathering funds for an epic cross-country road trip. Or maybe you’re just looking for a safe place with good rewards to store your paycheck and manage everyday spending.

Whatever the scenario, a deposit account can be the answer.

There are several different types of deposit products, including savings accounts, checking accounts, certificates of deposit (CDs), and money market accounts. While they all accept and protect deposits, they differ in terms of how often you can access your funds and the amount of interest you’ll earn on your balance. Here’s a closer look at the different types of deposit accounts, their pros and cons, and how they compare.

Basic Checking and Savings Accounts

There are several different kinds of basic checking and savings accounts. You may find standard accounts, premium accounts, and other variations offered by financial institutions. Here are the pros and cons of these deposit accounts.

Basic Checking and Savings Accounts

Basic checking and savings accounts are deposit accounts offered by banks and credit unions. Checking accounts are transactional accounts designed for everyday money management, while savings accounts are ideal for holding money for future use. Here’s a look at the pros and cons at each type of account.

Checking Account Pros and Cons

First, the pros:

•   A checking account typically allows access in multiple ways. You can write checks and get an ATM card or debit card. You typically also have access to online and mobile banking so that you can mobile deposit checks and easily pay your bills.

•   These accounts provide a hub for your financial life: You have a home for your paycheck to be direct-deposited, records of your transactions, and ways to track your money.

•   You’ll usually enjoy FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration) insurance of $250,000 per account holder, per account ownership category, per insured institution. Some institutions offer enhanced coverage, too.

•   You may find an interest-bearing checking account, though the rate is usually not as much as a savings account.

Next, the cons:

•   Many checking accounts pay no interest or very low interest, so you’re not helping your money grow.

•   There can be minimum balance requirements on checking accounts, especially ones with enhanced levels of service.

•   You may be charged accounts fees as well, which can cut into your cash.

Savings Account Pros and Cons

First, the upsides:

•   Savings accounts are interest-bearing, meaning your money can grow, especially through compound interest. However, not all savings accounts are created equal: Some standard accounts pay a very low interest rate. Look to online banks for higher rates (more on this below).

•   Savings accounts allow quick access to your funds. You can also link your savings account to your checking account, which makes it easy to automate savings deposits and move money into checking when you’re ready to spend your savings.

•   These accounts are also typically insured by FDIC or NCUA.

As for the downsides:

•   Interest rates for basic savings accounts tend to be low and may not keep pace with the rate of inflation.

•   You probably can’t access your account via checks or a debit card. You may also be limited to a certain number of transfers and debit card transactions per month. While the Federal Reserve has lifted the six-transaction limitation on savings accounts that originated during the pandemic, many banks still impose some transfer and withdrawal limitations on savings accounts.

•   You may encounter minimum balance requirements and fees if you go below that amount.

5 Other Deposit Account Options

Here’s a look at some other deposit account types you might consider beyond basic checking and savings.

1. High-Interest Savings Accounts

Some banks offer special, high-yield savings accounts that can offer signficantly higher rates than traditional savings accounts. Some institutions don’t charge monthly fees for these accounts while others do but will waive them if you meet a balance minimum.

As with all savings accounts, you may be limited in terms of the number of withdrawals or transfers you can make each month.

One good place to look for this type of account is at an online bank. Because these institutions typically have lower operating expenses than brick-and-mortar banks, they can often offer rates that can be considerably higher than traditional banks, and may also be less likely to charge monthly fees.

2. Money Market Accounts

A money market account is a type of savings account that earns interest and offers some of the conveniences of a checking account, such as check-writing and debit card access. MMAs typically offer a higher interest rate than a basic savings account, but generally require higher initial deposits. These accounts may also require a relatively high average monthly balance to earn the advertised rate and avoid account fees.

You may want to keep in mind the difference between a money market account vs. a money market fund. A money market account is a federally insured banking instrument, whereas a money market fund is an investment account. Typically, money market funds invest in cash and cash-equivalent securities. It is considered low risk but doesn’t have a guaranteed return.

3. Certificates of Deposits (CDs)

A certificate of deposit (CD) is a type of deposit account offered by banks and credit unions that provides a premium interest rate in exchange for leaving a lump-sum deposit untouched for a certain period of time.

The bank determines the terms of a CD, including the duration (or term) of the CD, how much higher the rate will be compared to the bank’s savings and money market products, and what penalties will be applied for early withdrawal.

CDs offer different term lengths that usually range from a few months to several years. Interest rates tend to be higher for longer terms, though that isn’t always the case. CDs often require a minimum deposit of $500 to $1,000 to open the account.

A CD can be a good option if you know you won’t be touching that money for the entire term length. If you suddenly need the money, then you will likely have to pay a penalty to withdraw money early from your CD. While you can get no-penalty CDs, they typically come with lower rates than regular CDs, and may require you to withdraw the entire amount all at once and close the CD.

If ease of access is a concern, it might make sense to invest in CDs that feature fewer restrictions around withdrawals. Or, you could set up a CD ladder strategy where you buy CDs that have different maturity dates, ensuring access to funds as your CDs mature at staggered intervals.

4. High-Yield Checking Accounts

Though interest is normally associated with savings, and not checking, accounts, many financial institutions offer high-yield checking accounts. These interest-bearing accounts, sometimes called “rewards checking,” work like regular checking accounts and come with checks and an ATM or debit card.

In return for getting a higher interest rate, high-yield checking accounts often come with rules and restrictions. You may, for example, only earn the higher rate on money up to a certain limit. Any money over that amount would then earn a significantly lower rate. You may also be required to make a certain number of debit card purchases per month and sign up for direct deposit in order to earn the higher (or rewards) rate and to avoid a monthly fee.

The benefit of an interest-bearing checking account is that you’ll always have access to your money and you may have fewer limitations on how you can use your account than you might with a savings account, all while still earning a bit of interest.

5. Cash Management Accounts

A cash management account is a cash account offered by a financial institution other than a bank or credit union, such as a brokerage firm. These accounts are designed for managing cash, making payments, and earning interest all in one place.

Cash management accounts often allow you to get checks, an ATM card, and online or mobile banking access in order to pay your bills. They also typically pay interest that is higher than standard savings accounts. In addition, cash management accounts generally don’t have as many fees or restrictions as traditional savings accounts, but it’s important to read the fine print.

Before opening a cash management account, you may want to ask about monthly account fees and minimum balance requirements. Some brokerage firms require a sizable opening deposit and/or charge monthly fees if your account falls below a certain minimum. Others will have no monthly fees and no minimums.

Time vs Demand Deposit Accounts

When you consider different kinds of deposit accounts, you may hear the terms time vs. demand accounts.
A time deposit, such as a CD, requires you to keep your money with a financial institution for a particular period of time. If you withdraw funds before the end of the term, you may face penalties.

With a demand deposit account, such as a checking account, you may access your cash whenever you like. While you won’t pay a penalty for withdrawing money, you may earn a lower interest rate than with a time deposit account.

Here’s a look at how these two types of deposit accounts compare:

The Takeaway

There are several types of deposit accounts, each designed for different financial purposes.
Checking accounts are ideal for everyday spending, paying bills, and accessing funds easily and, in some cases, you may be able to earn some interest on your balance.

Savings accounts are designed for setting money aside for a future goal and earning interest. While basic savings accounts generally pay a low rate, you can earn more by opening a high-yield account at an online bank.

Money market accounts are a hybrid option, offering some of the perks of both savings and checking accounts, and generally pay higher rates than basic savings accounts. CDs also pay higher rates, but require you to lock up your funds for a set period of time.

The best deposit account for you will depend on your needs and goals. You can likely benefit from opening more than one.

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 are the different types of deposit accounts?

There are four main types of deposit accounts: savings accounts, checking accounts, money market accounts, and certificates of deposit (CDs). A savings account is ideal for storing money and earning modest interest. A checking account is used for daily transactions like paying bills or making purchases. Money market accounts combine features of savings and checking but usually require a higher balance. CDs offer higher interest rates in exchange for locking in funds for a set period.

What is the most common type of deposit account?

One of the most common types of deposit accounts is the checking account. It’s widely used for everyday financial activities like receiving paychecks, paying bills, making purchases, and transferring funds. Unlike many savings accounts, checking accounts allow unlimited transactions, including debit card use and writing checks. While they typically offer little to no interest, their flexibility makes them essential for managing daily finances. Many people open a checking account as their primary banking tool.

Is a CD considered a deposit account?

Yes, a certificate of deposit (CD) is considered a deposit account. It’s a savings vehicle offered by banks and credit unions where you deposit money for a set period (or term) and agree to leave it untouched until the maturity date. In exchange for this, the bank pays you a fixed interest rate. A CD is considered a time deposit account (vs. a demand deposit account) because the money is locked in for a set period of time, and early withdrawals usually incur a penalty.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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SOBNK-Q225-087

A straddle is an options trading strategy investors may use to try to profit from changes in volatility, regardless of which direction an asset moves. Because the strategy isn’t pinned to a specific market direction, a straddle is considered a “neutral options strategy.”

Long straddles are used when an investor expects significant price movement in an underlying asset but is uncertain of the direction. They involve simultaneously buying a call and a put with the same strike price and expiration date.

Short straddles are used when an investor expects little movement in an asset’s price. They involve selling both a call and a put with the same time strike price and expiration. It’s important to keep in mind that straddles are a complex options strategy that aren’t suitable for most investors.

Understanding Puts and Calls

Understanding the difference between put and call options is essential to understanding straddles. A call option gives buyers the right, but not the obligation, to buy an asset at a specific strike price, whereas a put option gives buyers the right, but not the obligation, to sell an asset at a set strike price.

Meanwhile, a seller of a call option is obligated to deliver the underlying asset if the buyer exercises the contract. Similarly, a seller of a put is obligated to buy the underlying asset if the contract is exercised.

In options terminology, the strike price is the level at which the options contract can be exercised. For instance, say a stock is trading at $10 a share and a call option on that stock has a strike price of $12. If the stock reaches $12, the option buyer has the right, though not the obligation, to exercise the option.

An option’s expiration date is the date by which the call or put must be exercised. So an investor has until the expiry to exercise the option and buy or sell the underlying asset. After that date, the options become worthless. Another important term for options investors is the option premium. This is the value, or cost of the option itself.

How to Put on a Straddle Trade

In options trading, an investor can put on a straddle in two ways:

1) For a long straddle, they can buy a call option and a put option. Both contracts need to have the same strike price and expiration date.

2) For a short straddle, they can sell a call and put option that both have the same strike price and expiration date.

Long straddles are popular when investors anticipate an event will significantly move a stock’s price, such as near a company’s earnings or big product announcement. In a long straddle, the move in the underlying asset needs to be large enough to offset the combined cost of the call and put premium if the investor is to break even on the trade. The cost of the two premiums is the maximum amount of money the investor can lose.

On the flip side, short straddles are common when investors think volatility expectations are too high, meaning that share prices will move sideways or only change slightly. In a short straddle, the total premium received is the maximum amount the investor can earn from the trade. The potential loss, however, is unlimited since the share price could theoretically rise to infinity or fall to zero.

Examples of Straddles

Straddles are sophisticated options trading strategies and it’s crucial for investors to understand the potential for both profit and loss when considering these trades. Following are examples that help illustrate how price movements may change outcomes.

Long Straddle Example

Let’s say an investor believes Company A’s stock will either rise or fall sharply around the time it releases its quarterly earnings call. Company A’s shares currently trade in the market at $50 each.

In order to put on a long straddle, the investor pays $2 for a call contract and $2 for a put contract for a total cost of $4. Both contracts have a strike price at $50. The total cost for the investor will be $400, since each options contract equals 100 shares of stock.

To break even, the stock would need to rise above $54 a share or fall below $46. That’s because $50 plus $4 is $54, while $50 minus $4 is $46. Here is the formula to calculate the breakeven levels in long straddles:

Upper breakeven = Strike price + Total of two premiums paid

Lower breakeven = Strike price – Total of two premiums paid

Short Straddle Example

In a short straddle trade, the investor sells a call and put that have the same strike price and expiration. An investor might do this when they believe the market’s expectations for volatility in a stock are too high.

Say for instance, the implied volatility for Company B has climbed substantially. Implied volatility is the market’s expectations for volatility in an asset. In other words, the market believes Company B will see a significant price movement near its upcoming product announcement.

However, one investor thinks these expectations are inflated. If the stock’s movement after the announcement is actually muted, the value of both the calls and puts would drop quickly and the option would likely expire worthless. In that case, the short-straddle investor has benefited by having collected the premiums from selling the options.

Short straddles carry high investment risk, however, because the potential loss from a rising asset price is theoretically unlimited, while the loss from a sharp decline could be substantial. An investor may be required to buy or sell the asset at market price to cover the short call or short put.

Pros & Cons of Straddles

Straddles offer the potential for gains in volatile markets or when volatility remains low, but they also come with risks and costs that traders must consider carefully.

Pros of Straddles

1.    Market neutral: Investors may benefit from an options trade even if they’re uncertain which direction the underlying asset will move.

2.    Premium costs: In some cases, long straddles may be relatively affordable if implied volatility remains low before an anticipated event. Say, for instance, that an investor finds a stock that they believe will see high volatility in the future. If the cost of the calls and puts is relatively low at the time of purchase, the investor may benefit from a long straddle trade if the asset price moves significantly.

3.    Volatility bet: With long straddles, investors have the potential to make money when an asset’s stock volatility is high.

Cons of Straddles

1.    Pricey premiums: It can be tricky to get market timing right. When implied or expected volatility for an asset is high, the price of options premiums can also rise. This means investors looking to put on a long straddle trade can encounter costlier premiums. With straddles, investors pay for two options, which can raise the cost of entry.

2.    Time decay: Options lose value as they get closer to their expiration date — a concept known as theta, or time decay, in the derivatives market. Time decay may become a concern if market volatility is low for a while and an investor is aiming to exercise a long straddle position.

3.    Potential losses: In a short straddle, the potential loss is unlimited while the potential upside is limited.

Straddles vs Strangles

In contrast to a straddle, a long strangle involves buying both calls and puts but with different strike prices.

Strangles are more common when investors believe a stock is more likely to move in one direction, but still want to hold some protection in case the opposite scenario occurs.

Strangles typically cost less to initiate than straddles, but they require a larger price movement in order to be profitable.

The Takeaway

An options straddle is essentially a two-trade bundle that’s designed to allow investors to take a position on whether there will be a significant move in an asset’s price.

A long straddle may offer high returns if the asset moves sharply, while the total premium paid represents the maximum loss. However, if the stock trades sideways or doesn’t post a big move, the investor may lose the money they invested in the premiums. In a short straddle, the opposite is true. If the underlying asset doesn’t post a big move, the investor may profit, but the potential for loss is unlimited.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

FAQ

What is the difference between a straddle and a strangle?

Straddles and strangles both involve buying a call and a put, but straddles use the same strike price, while strangles use different strike prices. Strangles usually cost less than straddles, but they may require a larger price move to generate a profit.

What are the risks of a straddle?

With long straddles, the premiums may be costly and the position can be sensitive to time decay, especially if the underlying asset remains stable. Short straddles carry the risk of seeing unlimited losses if the asset moves sharply.

When do traders use straddles?

Straddles are often used during events that may create large price swings, such as earnings announcements or regulatory decisions. The goal is to benefit from the volatility they create, regardless of the direction. In contrast, short straddles are used when traders expect minimal price movement.

What determines the breakeven points in a straddle?

For a long straddle, breakeven points are calculated by adding and subtracting the total premium paid from the strike price. Profit may only occur if the asset moves beyond these points before expiration.