Understanding Savings Account Basics
What is a savings account?
Savings accounts are a convenient way to store your extra money through your bank or credit union.
Savings accounts are considered a "deposit account," which means your money is stored as a liquid asset and there will be a guaranteed rate of return. Deposits through credit unions and banks have federally provided insurance backing the balance against loss due to the closure of the financial institutions. Currently, the FDIC offers insurance coverage of $250,000 per single account, which will switch back to its maximum protection of $100,000 on January 1, 2010. Credit unions are backed by the protection of National Credit Union Administration (NCUA) and currently have the same limit of insurance coverage as the FDIC.
Types of savings accounts
There are two types of savings accounts: passbook and statement accounts.
Passbook accounts are not as common these days, but were the main choice for customers until modern technology took charge. With passbook accounts, depositors are issued a little bank book where all their transactions are manually recorded at the teller's window. Many banks no longer offer this service.
More prevalent are statement accounts which provide a monthly or quarterly statement of all account activity either online or via paper.
Features of savings accounts
Savings accounts make it quick and easy to access your money. Unlike other investments, there is no waiting period for a withdrawal.
Some banks will also let you tie your savings and checking account together, so you've get a reserve just in case you dip into your cash too much.
How do interest rates compare to other deposit accounts?
Generally, interest rates for other types of investments, like CDs and money markets, have higher rates of return (as high as 10%). A savings account has a significantly lower interest rate, somewhere around .5-2% is typical.
The interests rates are lower than other investments, but the deposits you make to your savings account are insured through the FDIC, which makes the investment safer.
Find savings account rates at Go Banking Rates.
Member Comments On...
Understanding Savings Account Basics
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aspect that you should look for when you want to open a savings account is that you choose to work with a bank or credit union that has a good customer service. Choosing to work with a bank with a low quality customer service means that you will constantly have to check whether your cash deposits made it to your account, if you have all the money you deposited in the account and if you were charged a correct fee for the transaction you made. In addition, because time is precious these days, it is important to be able to make your payments on time, rather than having to wait for hours or even days to fix one of the abovementioned errors or get to speak with a bank representative.
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People who are new to bank accounts mostly remain unaware of the various types of accounts. This information is an apt description for those to understand the basic concept of it. http://www.gvt-sheffield.co.uk/who-we-are.asp
