Savings Bank Account

A savings bank account is the most common type of bank account and is usually the first kind of account opened by customers. A savings bank account provides a safe place for money, while it earns a small percentage of interest. A savings bank account requires a low minimum balance or none at all.

How does my savings bank account work?

Commercial banks, savings and loan associations, credit unions, building societies and mutual savings banks offer savings accounts A savings bank account is often termed "near money" since obtaining funds is relatively easy - with withdrawals done at ATMs or the bank branch. The bank provides passbooks or bank statements to record financial transactions of savings bank accounts.

Some banks limit the withdrawals, payments, and transfers that savings bank accounts can perform. Banks comply with these regulations by immediately preventing the transfer, allowing the transfer to occur but notifying the account holder upon violation of the regulation or simply charging a small fee. Cheque-writing privileges are not offered by most savings bank accounts. Many institutions call their higher-interest demand accounts or money market accounts as "savings bank accounts."

How can one's savings bank account help manage finances?

One is less likely to spend if money is in a savings bank account. Also, putting money in a savings bank account is safer because it is insured. If your home is robbed or burned down, you could lose money forever.

One can also earn with the savings bank account. A savings bank account earns "interest" or money the bank pays so that they can use it to fund loans for other individuals. Here's how:

The bank pays interest on the money deposited and maintained in that account.
The bank then loans that money to other persons, charging a slightly higher interest rate on that loan than what they pay in a savings bank account.