savings account

Banking Terms -> savings account

• A savings account is a type of bank account and a safe way to grow money. It is an account that allows bank clients to earn interest in exchange for depositing their money. In fact, savings accounts are among the most common types of accounts, along with checking accounts. A minimum balance is normally required, for example, $20 or $25, or they may come with no minimum balance requirement. That will depend on the account type and the banking establishment.
  
  One advantage of savings accounts is that once money is deposited in it, the accountholder is less likely to spend the money. Moreover, deposits are insured by FDIC or NCUA (depending on whether the money is deposited in a bank or a credit union). Unlike that, your money will be lost if your house is robbed or another incident happens. Money deposited in savings accounts is kept in fireproof, locked safes. It is insured and even if your financial institution goes out of business, the money will still be available. Banks insure savings up to $250,000 while in 1980, the coverage was up to $100,000. Not a single bank client has lost their money since the Federal Deposit Insurance Corporation was established.
  
  In contrast to IRAs and 401k, accountholders have easy access to their accounts, although charges may apply if money is withdrawn early. In most cases, bank customers can withdraw their savings if they have access to an ATM or their bank is open.
  
  Banks are not the only financial institutions that offer savings accounts. Money market funds and credit unions may offer them as well. Deposits are insured with these types of establishments most of the time.
  
  Two types of savings accounts are offered by financial institutions – the money market account and the basic savings account. With the latter, the required minimum balance will be low, and the interest rate will be low as well. Money market accounts, on the other hand, pay higher interest, but clients are required to deposit more money. The number of withdrawals in one month is also limited. Some banks also allow clients to write up to 3 checks in addition to the withdrawals made. In some cases, financial institutions also charge a small fee for maintaining the savings account. This fee may be a dollar or a bit more per month. The fee is one factor to consider when opening a savings account. Other factors include interest rates banks pay on the balance as well as minimum balance requirements. With some financial institutions, clients are not charged a fee if certain amount of money is kept in the account. Regarding interest rates, banking institutions used to offer higher interest rates compared to credit unions in the past. The reason is that credit unions try to offer low interest rates on loans to their customers. Nowadays, some credit unions feature very competitive interest rates. It has to be noted that interest rates are more volatile with money market funds because they depend on the stock market.
  
  Under Regulation D, in the USA, savings deposits cover accounts and deposits that are made according to the regulations of depository institutions or under the terms and conditions of a deposit contract. In accordance with this regulation, depositors are authorized or allowed to make up to 6 withdrawals or transfers a month. Financial institutions may allow clients to make a maximum of 3 of these transfers by debit card, draft, check, or another similar order which is payable to a third party. No limitation is set in place regarding the number of deposits, but some financial institutions may limit them as well.

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