Types Of Savings Accounts

Savings accounts represent accounts at retail banks, with the major benefit for depositors being interest paid. The money in a savings account cannot be used directly although withdrawals are not limited. Clients can withdraw money from their account, but in some cases, they are costly. Applicable fees are usually higher than those that go with demand deposits.

Generally, there are two types of accounts, personal savings accounts and business savings accounts. The first variety is suited to the needs of individual clients while the second is a good option for business owners. One or more depositors can hold a personal savings account, accessing it at a time of their convenience, but not all banks allow this. Many such accounts go with a minimum balance requirement and fees are thus avoided.

Personal bank accounts can use a passbook or register to record all interest credits, deposits, and withdrawals. Banking institutions issue statements semi-annually, quarterly, or monthly, providing depositors with a record of transactions within the specified period of time.

Another variation of the savings account is the money market account. This type of account is featured with checks which can be used monthly. Money market accounts are offered by credit unions and banks much like normal savings accounts. Customers who choose this account type enjoy higher interest, but there is usually a higher minimum balance requirement. The minimum balance can be as high as $1,000 - $2,500. The minimum balance is lower with regular savings accounts, between $25 and $100. Banks make an exception for children, as the savings account is often the first bank account opened for them. Most financial establishments are quite accommodating to children, as this is one way to develop their future customer base.

Depositors who open a personal savings account can make three to six withdrawals and white up to three checks a month.

Some financial establishments also offer online-only savings accounts, along with standard savings calculators. These accounts are offered with high interest rates, along with more security restrictions. While banks offer high interest rates with these accounts, they make profits by attracting more deposits. Regardless of the fact that deposits are liabilities for financial institutions, and depositors can withdraw them any time, deposits are used to make more loans. Loans are assets for banks because the interest they charge on loans generates profit.

In what cases are savings accounts a good choice? Some bank customers prefer interest checking accounts, which pay lower interest compared to a savings account. At the same time, a savings account is a better option if you won't need the money over a period of several months. If you will not be able to maintain the minimum balance, you should not open a savings account because you will not benefit from the interest earned.

When you choose a savings account, you should take several factors into account. Ask about the fees and service charges first. Second, find out the minimum balance requirement, as you will be charged a fee if you do not keep certain money in your savings account. Lastly, you should check the interest rate, as this is how you profit from holding a savings account.

This informational resource, will help you learn more about savings accounts in Canada.