Savings Account

September 8, 2010Bank Accounts and Ratesby EconomyWatch

0

A savings account is an account in which anyone can deposit money to get a small amount of interest. It is offered by several financial institutions, such as commercial banks, credit unions, mutual savings banks and loan associations. Usually, savings accounts do not restrict withdrawals and the money can be withdrawn at any time from the bank premises or via ATMs. In the US, however, there is a limit on withdrawals, transfers and payments for savings accounts.

Types of Savings Accounts

There are several types of savings accounts including:

  • Basic Savings Account: This account allows the withdrawal or deposit of money any time one wants. The rate of interest on the money kept in such a savings account is low. A basic savings account does not provide the facility of checks.

 

  • Certificate of Deposit (CD): The minimum deposit requirement for this account is anywhere from $1,000 to $5,000. A CD requires you to keep money in the account for a certain period of time. If you withdraw money during this period, you may be penalized. A CD will earn you a higher interest than a basic savings account.

 

  • Money Market Account: A money market account is maintained with a minimum deposit, ranging from $500 to $2,500. It yields a higher interest than a regular savings account. There are a limited number of withdrawal transactions allowed in a month.

Benefits of Savings Account

The benefits of a savings account are:

  • Money kept in a bank is always considered safe since the federal government insures your funds.
  • Its functionality is convenient and easy to understand.
  • Banks pay interest to the account holders on the amount deposited by them.
  • A savings account offers a record of financial transactions via a passbook or bank statement.

Disadvantages of Savings Accounts

The disadvantages of a savings account are:

  • A number of banks may levy some charges for not keeping the specified minimum balance.
  • The earnings on the money deposited in a savings account are very low. The interest rate is lesser than that offered by other options.

A bank or credit union is considered the safest for opening a savings account. Look for a bank that offers online banking in order to make the money management process easier.

blog comments powered by Disqus