One of the most convenient forms of saving money is savings accounts in banks. A savings account is something between a checking account and a deposit. A couple of years ago, savings accounts were offered only by individual banks in Woburn, MA. Today, most of the major players have them. Let’s figure out how to open a savings bank account and begin to derive the maximum benefit from it.
How is a savings account different from a regular deposit?
The deposit is one of the most common ways to protect your money from inflation. Choosing this method, clients most often have to choose between the ability to freely manage money and receive a good interest on the deposit. And here the savings account in the bank comes to the rescue. This is a more comfortable way to use funds in everyday life since replenishment or withdrawal of money is allowed.
You can use such tools not only for savings but also for everyday money transactions. It is important to know and remember the rules for calculating interest since each bank has its own.
Minimum standard conditions for a savings account
- Unimpeded withdrawal of funds without reducing the interest rate;
- Replenishment of the account in any amount (usually with a limitation: the amount after replenishment should not be more than 10 times higher than the initial one);
- Payment of interest on the account balance for the period specified in the agreement.
Opening a savings account
You can open a savings account in person at a bank branch or via the Internet. Some banks allow you to open deposits through mobile banking. Often, an account is opened as part of a service package or is part of a comprehensive banking service agreement. To open such an account, you will need to deposit a minimum balance on the account (if provided by the terms of the agreement). All funds placed in excess of this minimum can be withdrawn without restrictions, in a currency convenient for you.
All individual rules for using the account and calculating interest will be specified in the agreement with the bank.
Several options are possible:
- Percentage of the minimum amount that was on the account during the month. This option is the most common;
- Accrual to the specified minimum balance, regardless of the amount on the account;
- Accrual on the daily balance. In this case, the calculation starts from the minimum amount that was on the account within one day. This option will be the most profitable for the investor.
Savings account benefits
- Money can be used at any time without loss of accrued interest;
- The account allows you to receive income in a short time;
- The interest rate on savings accounts in many banks is close to deposits;
- If the card has interest on the balance, but there are restrictions on the amount on which interest is charged, the surplus can be stored in a savings account;
- Fraudsters will not be able to get to the savings account by accessing your card;
- Funds of individuals placed in savings accounts are insured;
- The account is opened indefinitely.
Cons and pitfalls
- The bank can change the interest rate unilaterally;
- Often, banks give access to the account through a card. And here you will have to pay for the issuance of the card and its annual service, and we must not forget about the limits on cash withdrawals;
- Possible fees for cash withdrawal at the bank’s cash desk;
- If the bank charges interest on the minimum monthly account balance, then keeping a large amount on it for several days will not bring profit;
- To open a savings account, banks may not require a minimum amount, but in order to receive increased income, it is almost always necessary to keep a set minimum of funds on the account throughout the month; if the amount is below this threshold, income is accrued at a demand rate, which is very unattractive.
The main pitfalls of such accounts are related to the procedure for calculating interest. If you have not carefully read the contract and have not fulfilled the conditions stipulated in it, there is a chance that you will not receive any profit.
A savings account can be very helpful, but you should check all the terms and conditions and fees in advance and keep an eye on any changes. The main thing is to open an account with a reliable bank.