A savings account is a basic type of bank account, which helps your deposit and withdraw money. The deposited money can earn an interest of up to 2%. The funds in your savings account are insured up to $250,000. Savings accounts are offered by traditional brick-and-mortar banks, online banks, and credit unions. Typically, credit unions and online banks offer better interest rates than brick-and-mortar banks. Savings accounts are a great way to save money that you may need in the near future like a vacation fund or an emergency fund. Listed below are certain important things you should know about savings bank accounts:
Accounts with A High Apy Can Help Your Money Grow
A savings account with a high annual percentage yield can help you grow your money over a period of time if you avoid making withdrawals.
Savings Accounts Are Different from Checking Accounts
Savings accounts and checking accounts serve different purposes. A checking account is best used to deposit small sums of money to use for everyday expenses. In comparison, a savings account helps you save and grow your money.
There Are Limitations on Transfers and Withdrawals
The Federal law limits the number of withdrawals and transfers you can make from a savings account to six in any given month. Any additional transfers will usually incur a fee.
You Can Have Multiple Saving Accounts
Many people open multiple savings accounts to save money for different purposes. For instance, you can have a savings account solely for your emergency fund and another one for holiday expenses.
You May Be Able to Use Your Savings Account as An Overdraft Account
A good way of avoiding overdraft charges is by linking your savings account to your checking account. In the event of an overdraft, the funds will be deducted from your savings account instead of your bank having to cover it and charge you a fee for this facility.
Before you open a savings account, ensure that you compare the rates offered by different financial institutions. Once you zero in on a particular bank or credit union, you can open an account either by visiting the nearest branch or online through the bank/credit union’s official website.