Cash stash: Are bank accounts the only option?

An illustrated image of people putting money into a safe

Bank accounts are generally a secure place for your money, but they're not the only option

(Image credit: z_wei/Getty images)

published 12 May 2023

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The recent banking crisis may have you wondering whether your money is in good hands. While bank accounts certainly are still safe — deposit insurance covers up to $250,000 per depositor, per ownership category at each institution — that doesn't mean they're the only spot to stash your cash.

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Money market accounts are "hybrids between checking and savings accounts," The Balance explains. They are insured by the FDIC (or NCUA), and while you can write checks from them, there are limits on the number of withdrawals, account transfers, check payments or other actions you're allowed to make each month before incurring a penalty; usually you're capped at between five and 10 transactions per month, according to Investopedia. There might also be a minimum monthly deposit requirement to meet.

Money market accounts typically offer somewhat higher interest rates than those of checking or savings accounts. As an example, a "bank offering only a 0.10 percent interest rate on standard savings accounts, for example, might offer a 0.25 percent interest rate on a money market account," Investopedia says. Of course, rates will vary from bank to bank and depending on the overall rate environment.

With a certificate of deposit, or CD, you'll need to commit to locking up your money for a certain period of time, and withdrawals made before that period expires will incur a penalty. But in exchange, you can earn a fixed amount of interest that's slightly higher than that of a savings account. And the "longer the term that customers are willing to have their money tied up, the higher the interest rate available," Investopedia says. In some cases, however, lenders might "offer shorter-term promotional CDs that come with higher rates," The Balance adds.

U.S. government securities include U.S. Treasury notes, bills and bonds. These investments "have historically been considered extremely safe because the U.S. government has never defaulted on its debt," according to Investopedia. They also generally pay higher interest rates compared to savings accounts, though the exact rate you can earn will depend on the security's term (and selling before a security reaches maturity means losing money).

Treasury bills, or T-bills, are short-term debt obligations that typically mature within a year or less, whereas U.S. Treasury bonds take 20 to 30 years to reach maturity, which means they also pay the highest interest rates, per Investopedia. Treasury notes, meanwhile, can have terms ranging from two years to 10 years. As such, they don't offer as high of returns as Treasury bonds, though they "also generate a payment for investors twice a year," Investopedia says.

With short-term bond funds, you're investing "primarily in corporate and other investment-grade U.S. fixed-income issues and have durations of one to 3.5 years," explains U.S. News & World Report. Though there is greater risk involved here than, say, an FDIC-insured bank account, the "short maturities mean that there's limited impact to the fund price when interest rates change, and the yield generated by the fund generally tracks changes in interest rates," Kiplinger explains. As such, short-term bond funds are "relatively safe."

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Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.