With so many aspects to consider, like bank, interest, type, and terms, it might be difficult to weigh the pros and cons of a savings account. Here are some advantages and disadvantages of savings accounts that you should keep in mind:
Savings Accounts Earn Interest
This is one of the biggest advantages of using a savings account. Funds that are deposited in these accounts accrue interest with time. Money kept in a home safe or a non-interest earning bank account makes you miss out on valuable earning potential. Remember that the rate you earn depends on where you open the account and the terms of your agreement.
Savings Account Interest Rates Aren’t Locked In
Unlike CDs (Certificates of Deposits), savings accounts don’t have a locked-in interest rate at the time of account opening. This indicates that the interest rate could change depending on the bank and the market. Compared to their brick-and-mortar counterparts, online banks usually offer higher interest rates. This is because they don’t have the overhead costs associated with physical locations, and that’s why they’re able to pass on those savings to you in the form of better rates across all types of accounts.
Savings Accounts Are Easy to Access and Open
Generally, you can open a savings account in just a few minutes – over the phone, in person, or online. You can also make regular deposits and withdrawals (within the specified federal limits) without worrying about withdrawal penalties or committing to a term length. It’s easier to access your fund when you have an online savings account, wherever you have access to Wi-Fi or the internet. You can also link your savings account to checking accounts and other accounts to transfer funds between them.
Your Bank Might Have Limits on Savings Account Transactions
Even though it’s easy to transfer money to and from a savings account, there might be restrictions on the types and number of withdrawals allowed per statement cycle. You can make as many deposits as you like, but your bank may limit some types of electronic and telephone withdrawals (excluding ATM withdrawals). This can lead to a limitation in the mobility of your money.