Basic facts about savings account

A saving account is a deposit account that encourages the investor to invest effectively so that he can save money without delaying his day-to-day purchases. (1)

Working on a saving account

A saving account acts as a source of funds that are lent by financial institutions to the public. For that reason, a saving account can be found at every credit union or bank; whether it is brick-and-mortar set up or operates online. Moreover, it can also be seen in some brokerage and investment firms. Before opening a savings account, one must know the regulations of the associated bank. Some require a minimum balance to eliminate the monthly fee while others do not.

Types (2)

The benefits of saving accounts vary according to the type. If one is providing a great interest rate then the other is giving unlimited access to deposited cash. Among different types of saving accounts, the most common are:

The Deposit account
The Money market account
The Certificate of deposit

Working of all three types of saving accounts is the same, which is depositing cash in the account and taking interest on it. But each of them is providing perks in different ways.

The deposit account

This account is also known as a “transactional saving account”. It provides the simplest method to deposit cash in a credit union or a bank and earn interest over it. The opening of this account requires a small initial deposit. It allows an account holder to transfer the cash from saving to a checking account. One of the drawbacks is its limited withdrawal policy.

Money market account

The working of this account resembles the deposit account that is deposit cash and gain interest. But this account needs a voluminous initial deposit, and an account holder gets charged if his balance declines below the set level. Its advantage is that it gives higher interest rates than other saving accounts. Unlike transactional saving accounts, the money market account permits the customer to write a check for withdrawing cash.

Certificates of deposit

In comparison to other types, it has a maximum interest rate but the lowest liquidity. It is suitable for the one who wants to save for a specific period. It offers higher interest rates because a set amount of cash is invested for a specific time length. This period can be as few months and as many more as several years. Interest rate increases with the period length. The best rates range from 1% to 1.35%.

Advantages

It allows stacking of cash separate from everyday needs and helps in saving money for a targeted goal.
Depositing money in a saving account is way safer than keeping it under the mattress or in the drawer.
Unlike a checking account, one can earn interest on money deposited in a saving account.
It’s high liquidity permits frequent access to cash.
Having a saving and checking account in the same bank allows convenient and instant money transfer.

Disadvantages

One can earn more interest through other means of saving money, such as investment in bonds and stocks.
Its high liquidity is a drawback as well. Frequent and easy access to money tempts an account holder to withdraw money whenever needed.
In comparison, it is hard to cash bonds or sell a stock and that keeps money safer for a long time.
Some saving accounts need minimum cash to remain active.

Saving accounts interest rates

According to a simple interest calculation, an individual earns $1010 with 1% interest on $1000 at the end of a year. Some investors withdraw the earned interest and use it for their day-to-day needs. In that case, their accounts will keep earning simple interest only. On the other hand, some investors find the interest rate low and do not withdraw the earned interest. In that case, their accounts will start earning compound interest. With compound interest, an individual has the chance of earning more at the end of a year.

Best No fee and high yielding saving accounts (3)

SmartyPig by Sallie Mae

The annual percentage yield is 0.70%
Requires no initial minimum deposit
The minimum balance to keep the account running is $0.01
No monthly fee
No ATM card
No mobile check deposit
No checking accounts are available
No CDs available

Affirm saving account

The annual percentage yield is 0.65%
No amount is set as a minimal initial deposit
No amount of minimum balance is set to keep the account active
No monthly fee
No ATM card
No mobile check deposit
No checking account is available
No CDs available

Axos Bank, high-yield saving account

The annual percentage yield is 0.6%
The initial minimum deposit is $250
$0 is required to keep the account running
No monthly fee
ATM card is available
Mobile check deposit is available
Checking account facility is available
CDs are available

IVY bank, High-yield saving account

The annual percentage yield is 0.61%
$100 is the initial minimal deposit
$2500 is required to gain the stated APY.
No monthly fee
No ATM card
No checking account is available
Mobile check deposit is available
CDs are available

Personal saving account in Prime Alliance Bank

The annual percentage yield is 0.60%
No amount is set as initial minimum deposit
No monthly fee
ATM card is available
Mobile check deposit is available
Checking account facility is available
CDs are available

Monifi

The annual percentage yield is 0.60%
No minimum initial deposit
No monthly fee
ATM card is available
Mobile check deposit is available
Checking account facility is available
No CDs available

ConnectOne bank

The annual percentage yield is 0.60%
$2500 is the minimum initial deposit
$2500 is required to gain the stated APY
No monthly fee
No ATM card is available
Mobile check deposit is available
Checking account facility is available
CDs are available

High-yield money market account by CFG bank

The annual percentage yield is 0.59%
$1000 is the minimal initial deposit
$25000 is required to gain the stated APY
$10 monthly charges
No ATM card is available
Mobile check deposit is available
CDs are available

Reference

Basic facts about savings account

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