Savings Account

A savings account is generally used for risk-free savings in a bank or a credit union. The interest rate on such accounts is not that high, but your money is usually safe from volatile market forces. Savings accounts can be divided into 5 categories, i.e., personal savings account, health, business, children’s, and installment savings account.

Features of savings account

As per Regulation D, there is a restriction of 6 transfers or withdrawals each month on all types of savings accounts. After that limit is over, each bank determines on its own the fees charged on each additional transaction. In case of increased number or transfers or withdrawals, it is also possible that the bank converts the savings accounts into a checking account or closes the savings account.

Savings accounts also come with ancillary charges like overdraft fee, minimum balance fee, return-item fee, extended overdraft fee, early closing of account fee, and account inactivity fee, etc.

Savings Account interest rate change frequency

Every year 8 meetings are held by the Federal Open Market Committee. At such meetings, there is discussion on the economic situation and the interest rates are adjusted as per the prevailing conditions. When and if the rates are adjusted by the committee, banks, credit unions, and other financial companies may consequently make adjustments to the savings account interest rates. However, such adjustment does not occur quickly.

Credit unions and banks typically employ savings account interest rates to get more customers. Hence, we often come across special offers on high savings account interest rates for a limited time period. Such offers are launched to attract new customers. The interest rate may subsequently change and become lower at a later date. Hence, customers should first find out the regular savings account interest rate as compared to the promo interest rate before opting to open a savings account in that bank or financial institution.

Savings account in an online institution vs. Savings account in brick-and-mortar institution

Brick-and-mortar banks allow customers to have a personal relationship with the institution, which is not possible with online banks. However, most online banking institutions offer better interest rates and other facilities than brick-and-mortar banks.

Savings account in a bank vs. Savings account in a credit union

Customers can opt for opening a savings account in either a bank or a credit union as per their needs. As compared to banks, credit unions have increased interest on varied investments, reduced fees, and better personalized customer service. Savings accounts’ money in banks is insured by FDIC while the money in credit unions is insured by NCUA. Customers need to ensure that the credit union or bank that they open a savings account in has insurance from either of the above listed entities.

Before opening a savings account in a bank or a credit union, customers also need to check the minimum balance required to open and maintain the account and other fees and charges to make a choice that best suits their needs and budget. Credit unions have a membership fee, which banks do not have. So make all the calculations and verify the best place to open a savings account.