If you're thinking about investing in anything, whether it's stocks or cryptocurrency, there's bound to be some new lingo you have to learn.

If you decide to take the plunge and invest in cryptocurrency, two of the most common terms you'll come across are crypto custodial wallet and non-custodial wallet. But what do they mean? And is one better than the other?

What Is a Crypto Custodial Wallet?

ethereum commemorative coin next to a wallet

When you get money from your job, where do you put it? Most of us put our money in a bank, or in some other way, into the hands of others to manage for us. Cryptocurrency, just like cash, needs to be stored somewhere so you can keep track of it, make deposits, and withdraw from your total when you need to.

The easiest comparison for a crypto custodial wallet is a traditional bank. When you open a checking or savings account, you give your information, funds, and trust to a third party or the bank. The same goes for cryptocurrency and a custodial wallet.

Related: What Is Crypto Cloud Mining?

Cryptocurrency has to be accessed using private keys. If you use a third-party company to set up a custodial wallet, the company has access to those private keys. You're trusting this company to keep your funds secure and access them using your private keys when you want them to.

Custodial wallets are less risky than they once were, now that cryptocurrency has boomed in popularity and reputable companies act as your "cryptocurrency banks." But in the early crypto days, trusting your private keys with someone else meant that they could use them, access your money and run off with it, leaving you with nothing.

What Is a Crypto Non-Custodial Wallet?

an open wallet with commemorative bitcoin coins spilling out

Where putting your cryptocurrency in a custodial wallet puts your private keys (and essentially, your money) in the hands of a third-party company, a non-custodial wallet gives you complete control. This means that you, and you alone, are in charge of keeping track of your private keys that allow you to access your cryptocurrency funds.

Choosing the non-custodial wallet option makes you your own bank, which sounds great in theory. But you have to be technically skilled enough to understand all the intricacies of transactions and have a good enough memory not to misplace your private keys. If you lose your keys, you lose your money.

Related: Why Crypto Is the Perfect Gift For Any Occasion

In addition to software non-custodial crypto wallets, there are also hardware non-custodial wallets. These hardware wallets typically look like a little USB flash drive with extra features, like a screen and buttons.

Although you do have to connect your hardware wallet to a computer or smartphone (or the internet) to complete a transaction, it's a lot more secure because the transaction signature takes place offline in the hardware wallet before being sent online.

How to Choose Between a Custodial and Non-Custodial Wallet

So now that you know the differences between a custodial crypto wallet and a non-custodial crypto wallet, how do you decide which one is right for you?

a bunch of different monitors with photos of the stock trading market

Control

The biggest factor you'll need to consider is how much control you want over your crypto funds.

If you know that you're not tech-savvy, a custodial wallet might be your best bet. Nowadays, there are plenty of reputable custodial wallet companies, many of which store each individual's cryptocurrency balances in hardware wallets. It'll just take some research to find the right one for you.

Non-custodial wallets give you 100% control over your funds, but that also means you're 100% in charge of keeping up with your private keys and your wallet. There is usually a backup key in place if you lose your private keys, which is a string of words displayed when you set up your crypto wallet. But you're in charge of keeping track of that backup too.

Related: Proof of What? Key Crypto Mechanisms Explained

Accessibility & Ease of Use

Just like a regular bank, using a custodial wallet with a third-party company requires the internet to access your funds and make transactions. If there's a service outage, you're at the mercy of when internet service returns before you can do anything with your cryptocurrency.

However, the user interface is usually beginner-friendly with a third-party custodial wallet. Your third-party crypto "bank" takes care of all the tech details behind the scenes and gives you a streamlined interface that makes it easy to see how much crypto you have on hand and exactly what you can do with it.

A non-custodial wallet can be accessed at any time, internet connection or not, but there's a much larger learning curve when it comes to learning how to navigate the intricacies of your wallet.

Related: The Best Apps for Tracking Crypto Stats

Security

Non-custodial wallets are more secure when it comes to data breaches because everything is in your hands, often in a hardware wallet that hackers can't reach.

Even if you go with a super reputable third-party, a custodial wallet is more prone to data breaches, where you could lose some or all of your cryptocurrency or your private keys. But security measures are getting better every day, and the risk of data breaches is slowly going down as more third-party companies adopt cold storage hardware wallets for every individual consumer.

Remember, Crypto Investments Are Risky

At the end of the day, choosing between a custodial or non-custodial wallet depends on how comfortable you are with computer security. Do you trust someone else more with your cryptocurrency because you're not as tech-savvy? Or do you already have a large working knowledge of crypto and know you're capable of learning all the ins and outs?

Deciding between a custodial wallet or a non-custodial wallet for your cryptocurrency is just one of many steps you need to take before investing your hard-earned money. And remember that any investment, whether cryptocurrency or otherwise, comes with risk. It's up to you to decide how much you're willing to risk and whether you can afford to risk it.