Savings accounts are an excellent choice for parking money for future purchases, emergency uses, and when you want to earn a bit more interest on your reserves. Savings accounts can vary by the bank or credit union so you should compare and shop around to find the best one for you. If you currently have a checking account with a financial institution, it might be the best place to look first, but keep your options open and see what’s out there.
Types of Savings Accounts
Most banks and credit unions offer several different types of savings accounts. Base the account type that you’re looking for on the liquidity, interest, and other factors of the account options offered by financial institutions. Here are three of the most common types of savings accounts that you will likely come across:
Regular Savings Account – The savings rate varies, and some financial institutions offer high-yield interest-bearing accounts if you can carry a larger minimum balance or for up to a certain amount of money. You are restricted to six withdrawals and transfers per month due to federal law. If you withdraw the money to use from a branch location, this limit doesn’t apply. There is more liquidity than other types of savings accounts if you need access to the money, though not as accessible as a checking account.
Money Market Account – The interest rates on money market accounts tend to be higher than a regular savings account. To earn this interest, you are typically required to hold a higher balance. The six-transaction limit also applies to money market accounts. Some financial institutions will also provide a debit card or checkbook to access your funds.
Certificates of Deposit – Out of the three types of accounts, CDs typically pay the highest interest rates. The financial institution will hold an agreed-upon amount for a certain length of time, which is called the term. Withdrawing your money before the term will typically result in an early withdrawal fee. In general, the longer the term, the better the interest rate is on a CD. Terms can range from a few months to several years.
Once you’ve decided on the type of savings account to open, it’s time to look at some key factors that should play into your decision.
A Competitive Interest Rate
Among the most important reasons to put your money into a savings account is that you will earn more interest than what’s possible in a non-interest bearing checking account. Your money should be working for you in a savings account. Look for accounts that offer competitive interest rates, and be aware that the range can vary. Online banks have traditionally offered higher interest rates, though that’s changing. You could find a traditional bank or credit union that has comparable interest rates with online-only banks.
Savings accounts should not have unnecessary fees that take away the purpose of building substantial savings. Some savings accounts may charge you a fee if you fall below their minimum balance requirement. There could also be fees for making more than six withdrawals or a fee if your account is inactive for a specified period. Read all the details in the fine print before opening a savings account, so you know what to expect. Also, make sure that the money you put into your account is an amount that you can tuck away. It is not worth getting a fee if you can’t keep your account above a minimum balance requirement.
Automatic Transfer Capabilities
Almost every financial institution at this time will allow you to set up automatic transfers to your savings account. This is a great way to make saving an automatic habit and build your balance over time. If you are setting your savings account up at a different bank from the institution you have the transfers coming from, review the time frame it takes to complete the transfer. For example, if you set up a transfer to an external account on the 10th of every month, it may take three to five business days before that transaction is completed.
To open a savings account with NASB, you can do this online or give us a call at 800-677-6272 to learn more.