Savings accounts are excellent choices for parking money for future purchases, emergency uses, and when you want to earn more interest on your reserves. Savings accounts can vary by bank or credit union, so you should compare and shop around to find the best one. 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 you’re looking for on the liquidity, interest, and other factors of the account options financial institutions offer. 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 or transfers per month. If you withdraw the money to use from a branch location, this limit doesn’t apply. There is more liquidity than other 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. You are typically required to hold a higher balance to earn this interest. 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 – CDs typically pay the highest interest rates out of the three types of accounts. The financial institution will hold an agreed-upon amount for a certain time, called the term. Withdrawing your money before the term typically results in an early withdrawal fee. 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, you should consider some key factors.
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 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 with comparable interest rates to online-only banks.
Are Fee-Free
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, ensure that the money you put into your account is an amount 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 up your savings account at a different bank from the institution from which the transfers are coming, review the time frame 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 to complete that transaction.
To open a savings account with NASB, you can do so online or call 800-677-6272 to learn more.
