If you are looking for a convenient way to store your extra cash while keeping it safe then a savings account through either a bank or a credit union is the way to go. But before running to deposit wads of cash through your favorite financial institution, there are some basic things you need to know about savings accounts.
Savings accounts are considered a “deposit account,” where 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 January 1, 2010. Credit unions are backed by the protection of National Credit Union Administration and currently have the same limit of insurance coverage of the FDIC.
There are two types of savings accounts called 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.
Consumers need to actively comparison shop for savings accounts as the terms differ from bank to bank and account to account. Some basic points to consider when shopping for a savings account are:
- Interest rate
- Minimum deposit required
- Fees and penalties
- Withdrawal limits
- How interest is earned (compounded and how often)
By analyzing all the basics required for opening up a savings account, you are sure to find an account that will suite your needs perfectly.