A savings account is a type of bank account that allows you to save money. The average interest rate on a savings account is around 0.06%, but some banks offer rates as high as 2%. The minimum deposit required to open a savings account varies from bank to bank but is usually between $25 and $100. The maximum deposit allowed in a savings account also varies from bank to bank but is typical $250,000 or more. Most banks do not charge monthly maintenance fees for having a savings account, but some do.
Savings accounts open up a world of opportunities for you. For example, if you have a savings account, you can use it to save up for a down payment on a house or car. You can also use it to save for retirement.
Key numbers to know about savings accounts
1. The average interest rate on a savings account
The interest rate is at 0.06%. Some banks offer higher interest rates on savings accounts, so shopping around is essential to find the best rate.
The average interest rate on a savings account is typically higher than that on a checking account.
Earns interest:
This is the main reason people have savings accounts. When you deposit money into a savings account, the bank pays you interest on that money. The interest rate is usually meager (less than one percent), but it’s still better than nothing. Interest earned on savings accounts is taxable.
Competitive interest rates:
Some banks offer higher interest rates on savings accounts than others. It’s essential to shop around to find the best rate.
Tiered interest rates:
Some banks offer tiered interest rates, which means you earn a higher interest rate if you maintain a certain balance in your account. This can be helpful if you want to earn the most interest possible on your savings.
Compounding interest:
Most savings accounts compound interest, which means the interest is added to your account balance
Annual percentage yield (APY):
The APY is the interest rate that you earn on your savings account. This can vary from bank to bank, so compare different banks to find the highest APY.
If you are looking for a higher interest rate:
If you are looking for a higher interest rate on your savings, you may consider an online savings account or a money market account. Online savings accounts typically have higher interest rates than traditional ones, and money market accounts typically have higher interest rates than both.
2. The minimum deposit required to open a savings account
The minimum deposit required to open a savings account varies from bank to bank but is usually between $25 and $100.
You may be able to waive the minimum deposit:
Some banks allow you to waive the minimum deposit requirement if you set up a direct deposit or maintain a certain balance in your checking account.
May have a monthly service fee:
Be sure to ask if the bank charges a monthly service fee for having a savings account. Some banks do, but many don’t.
No minimum deposit:
Some online banks don’t require a minimum deposit to open a savings account. This can be helpful if you don’t have much money.
Look for banks that offer promotions (e.g., sign-up bonuses)
Banks often offer promotions to new customers who open a savings account. For example, you may be able to earn a sign-up bonus if you deposit a certain amount of money into your account within a specific timeframe.
Promotions to watch out for:
Be sure to read the fine print on any promotional offers. Some promotions may require you to maintain a balance in your account or make regular deposits to earn the bonus.
3. The maximum deposit allowed in a savings account
The maximum deposit allowed in a savings account also varies from bank to bank but is typical $250,000 or more. Most banks do not charge monthly maintenance fees for having a savings account, but some do. Some banks may charge a fee if you exceed the limit.
Excess withdrawal limit :
Be sure to ask about the bank’s policy on excess withdrawals. Some banks may allow a certain number of monthly withdrawals without fees, but others may charge a fee for each withdrawal.
4. How often you can withdraw money from your savings account without a penalty
Most banks allow you to make six withdrawals from your savings account per month. You may be charged a fee if you make more than six monthly withdrawals.
ATM access:
Be sure to ask about the bank’s ATM policy. Some banks allow you to use an ATM, while others only allow you to use their ATMs. There may also be a fee for using an out-of-network ATM.
Debit card access:
Some banks allow you to use your debit card to withdraw from your savings account, while others do not. There may also be a fee for using your debit card to withdraw.
Online access:
Most banks allow you to access your savings account online. This can be helpful if you want to check your balance or make transfers without going into the bank.
Mobile app access:
Some banks also offer mobile app access to your savings account. This can be helpful if you want to check your balance or make transfers on the go.
Telephone access:
Some banks also offer telephone access to your savings account. This can be helpful if you want to check your balance or make transfers without going into the bank.
In-person access:
Most banks allow you to access your savings account in person. This can be helpful if you want to deposit cash or talk to a teller about your account.
Federal deposit insurance corp (FDIC):
All savings accounts are FDIC-insured, which means your money is protected for up to $250,000 if the bank goes out of business.
Traditional savings accounts typically offer lower interest rates than other accounts, but they are still an excellent way to save money.
Member FDIC:
This symbol indicates that the bank is a Federal Deposit Insurance Corporation (FDIC) member. This means your money is protected for up to $250,000 if the bank goes out of business.
Now that you know all about savings accounts, it’s time to start shopping for the best interest rate! Be sure to compare different banks and credit unions to find the account that’s right for you.
5. Whether the bank charges monthly maintenance fees for having a savings account
The monthly maintenance fee is the fee charged by the bank for having a savings account. This fee can vary from bank to bank but is typical $0-$15 per month. Some banks may waive the monthly maintenance fee if you maintain a certain balance in your account or make regular deposits.
The bottom line
A savings account is an excellent way to save money and earn interest on your deposited funds. Shop around for the best interest rate and terms before opening an account. Also, be sure to ask about any fees associated with the account to avoid them. Lastly, be sure to choose an FDIC-insured account so your money is protected in case of a bank failure.
