Savings Account

Financial Dictionary -> Banking -> Savings Account

A savings account is one of the transactional accounts offered by banks, credit unions and financial institutions. Opening a savings account means a customer has contacted one of these institutions with the intention of depositing money in an account. A savings account is usually opened with the intention of saving either for the future or some specified reason. A customer may open several savings accounts for different reasons, such as a Christmas account, a college savings account, an account to save up for a house, car or for any other reason. These accounts usually earn interest for the account holder, therefore making it beneficial to leave their money in there and build up the amount in the account.

One difference between a checking account and a savings account is that with a savings account the money cannot be used by writing a check. However, it is usually accessible with a debit card from an ATM. In order to open a savings account, a deposit of at least $100 is often required.
Higher interest bearing accounts are usually known as money market accounts. They are a type of savings account that generally requires a minimum deposit. Some savings accounts have limitations such as limiting the amount of withdrawals within a specified time. In this case, if the account holder exceeds the specified number of withdrawals, he may be charged a fee.

One feature of a savings account may be the advantage of transferring funds easily between it and the account holder's checking account. This can often be accomplished online, by telephone or in the bank or financial institution itself.

Sometimes people choose to use an interest-bearing checking account rather than a savings account. However, others find that the advantage of having a separate savings account allows them to save more money as access to it is more limited.

Before opening a savings account, it would be wise to compare various banks, credit unions and financial institutions in order to get the best interest rates and the account offering the features that you prefer.