Savings account seem pretty simple. All you have to do is to just open an account, deposit some money and earn interest but there is more to it. There are also different types of savings accounts. So we have here, for you, everything you need to know about saving accounts. Hang in there and know what you might not know despite having a saving account.
Savings account are bank accounts that function slightly differently from a checking account. With a saving account, you usually do not have the amount of liquidity like that of a current account. Saving accounts allow you to earn money in the form of interest on your savings. Saving accounts may do not offer the same liquidity as a checking account but still easy to access. You may be unclear on the transaction restriction, maintenance charges, minimum reserves, etc. of the savings account so we will try to clear your doubts about having a savings account right here.
Transaction limitations (not as you might think)
Usually there is a limit on the number of times you can draw amount from your savings account. These transaction limits are for the transfer to your checking accounts, checks, and bill payment. But you do not need to worry about the access to your money. You can generally withdraw your money through an ATM whenever you want.
Minimum balance misconception
Saving accounts also vary in the terms of money reserves that you need to maintain in your savings account. It may be so that you can open an account with as little as $0. Generally, banks have a requirement of $25 to open a savings account which is also not required by online banks. If you maintain a minimum balance of $300 then, with many banks, you can avoid the fee totally.
The interest rate
The interest you get on your savings account depends on the saving you maintain, your financial institution and the general rate offered in that market. Different credit unions have an option of a saving account as it is not just the banks that offer you a saving account. Saving account is not only about earning interest but some other factors will help you grow your saving in different ways. Also, there is a difference in the rate offered by banks and different financial institutions.
Benefits of having a saving account
Saving accounts have different benefits that are discussed below
Your saving accounts are federally insured which means if somehow the bank crashes, your money is insured up to $250,000. Saving accounts are also a secure option than piling up your money at home.
You make earnings on your savings
As banks and other financial institutions are money intermediaries, so your money just not stay stagnant with the banks and financial institutions. They make money by lending your money so you are offered an interest rate on your savings.
Savings Accounts are easy to use
Whether it be your checking account or savings account you can easily transfer and withdraw money. These services are available online and many large banks also offer mobile banking. Also, you can also opt for auto transfers so you just do not have to involve in transactions over and over again.
Options similar to saving accounts
As mentioned before, different financial institutions other than banks also offer savings accounts. So you may have to understand the differences to decide the best option for you. Below we have mentioned the alternate options to a savings account for your knowledge so you do not have to struggle for finding the right one.
Money market accounts
Money market accounts also have restrictions on the number of your monthly transactions. These also allow you six transactions per month. Though money market account offers you a comparatively better interest rate than a regular saving account. It also offers you with facilities like debit cards just like a checking account. It is just that if you do not want the restrictions on transactions and withdrawals then you should consider a checking account instead.
Online saving accounts
Online accounts are just as same as a regular saving account. Here because of the online setup, there are no overhead costs involved so you are offered a higher interest rate. You also do not have to pay any maintenance fees as well. Online accounts offer mobile transactions and also the transfers to and from your checking account.
Certificates of deposits- CDCS
These are deposit certificates that you can buy but these have a maturation period. The maturation period of a Certificate of Deposit may vary from 3 months to 5 years. You are not allowed to withdraw before the said time. If you want to withdraw your cash before the maturation of your deposit certificate that you have to pay the penalty. Here you are provided a high-interest rate ranging to 3% per annum. But you have to be sure here with your need for money withdrawal.
If you want to set a sum of money aside then deposit certificates may be the best option for you. But if you may need money or there is some uncertainty revolving around your need for cash then it might not be an option for you at all.
With the information above you can assess your needs and match with the options, you have to generate the maximum possible benefit.