What is a savings account?
A savings account is basically any type of personal financial account that banks, credit unions, and other financial institutions offer their customers and pay interest on those account balances. However, they cannot be used as money directly. These types of accounts enable the account holder to set aside portions of their earnings or liquid assets while they earn a return on the money deposited into that account. In this way, the account holder can also earn additional long-term income by maintaining this type of financial account. Now having read this you might be asking how do savings accounts work exactly?
How savings accounts work
Savings accounts are usually offered at numerous financial institutions such as:
Savings accounts are oftentimes referred to as “near money” accounts even though obtaining funds from them is not quite as easily served as it is by other demand types of accounts. You may have to use an ATM machine or visit the local branch of the bank where your savings account. This is a bit more tedious than using a debit card or writing a check.
Some savings accounts require that deposited funds remain untouched for a specified period of time before they can be withdrawn while others permit access to the funds without any limitations. Additionally, no check-writing privileges are offered with a true savings account although some financial institutions will typically refer to their interest bearing checking accounts or money market accounts as savings accounts.
One aspect that all savings accounts to have in common is that an itemized list of all transactions are usually provided to the account holder through what is called a “passbook” but bank statements may also be printed and mailed to the individual. Today, roughly 65% of all the people in the US have savings accounts. So as you can readily see, saving money using a savings account is still a popular concept.
Finding The Best Savings Accounts
If you’re starting to search for the right bank for opening a savings account, or if you are considering closing your current account and transferring the funds to another bank of other financial institution, here are a few things to consider before making your decision:
Believe it or not, online banks are currently offering the best savings accounts in that they offer higher interest rates, lower account maintenance fees, and do not require account balance minimums
Consider the extra features offered such as CD’s, financial software, physical locations in your local area, etc. when you are comparing banks
Another recommendation is that you read consumer reviews of the various banks that you are considering as it is always wise to do some research about each of those banks
You may find that some of the banks that you are investigating do offer payment account services such as debit cards, electronic check writing or standard checking privileges, and online bill paying capabilities (if these are essential services that you need).