Interest Bearing Savings Account Definition – The Definitive Guide To Choosing The Best Savings Account
An interest bearing savings account “definition”, it is a bank account that pays you to hold your money. Better still, an interest bearing savings account definition, a bank account that earns you an interest rate in exchange for depositing your money at the bank. However, interest rate vary depending on the bank’s and account terms and conditions. Most banks, credit unions and other financial institutions offer interest bearing savings accounts in addition to other accounts. You might even find some savings accounts that offer higher interest rates than others.
In this article, I will highlight the different types of interest beainterest bearing savings accounts for you so that you can compare with, and choosing the best account for financial transactions. It includes four popular alternatives, that’s savings accounts, online-only savings account, money market accounts and certificates of deposits. Read also 8 Simple Ways To Grow Your Bank Account In A Month
1. Savings Account
A savings account is a type of bank account that offers you a safe place to store your money and earn compounding interest. This is a basic type of bank account that allows you to deposit money regular, which you can withdraw your money from it. Most banks pay compounding interest on the balance of these accounts.
How Interest bearing Savings Account “Definition” Work
If you deposit money in an interest bearing savings account, it is insured by the Deposit Insurance Corporation. If in case something unfortunate happens to the institution that your money is in, you will get it back up to a certain limit. A lot of interest bearing savings account “definition” offer compounding interest as an incentive while saving your money. When you deposit money, you earns interest, which is deposited back into the account. The new balance earns interest and so on. That means it’s compounding. Read also How To Practically Reward Yourself With Ten Percent Paycheck Savings Every Month
You can use the money in your savings account, but transactions are limited to six per month, While there is a transfer limit, it’s important to understand that only specific types of transfers count toward that. In-person transfers, transfers by ATM withdrawals from savings do not count towards the six transfers per month rule or affect the status of the interest bearing savings account. The actions that do count towards the six-transfer limit are,
√ Transferring funds to another of your accounts.
√ Third-party payments through pre-authorized, automatic or telephone transfers.
√ Withdrawals by check, debit card or another similar instrument to pay a third party.
However, many banks will send you a notice if your account is getting to six-transfer transactions limit. According to regulations, they will have to convert the account to a savings account if it happens that you go beyond the transfer limit. Mostly, you can use your savings account to do any of the below so long as you follow the six-transfers-per-month rule.
√ Deposit or withdraw cash – The traditional way to make deposits and withdrawals is to go to the bank and deposit or withdraw cash or use an ATM.
√ Deposit checks – You can deposit checks directly into an interest bearing savings account “definition” if your bank allows that. Your bank may also allow check deposits into savings through a mobile app as well.
√ Transfer to and from checking account (internal) – If you have a checking account, you can move money to and from checking to savings within the same bank, usually instantly.
√ Electronic transfers (bank to bank) – You can also make electronic deposits and withdrawals to and from a savings account from another bank.
√ Direct deposit – If your employer pays you by direct deposit, you can have money put directly into your interest bearing savings account “definition”
√ Request a check – In certain circumstances, you may want to have your bank to print a check for a vast amount using funds from your savings account.
To compare savings accounts, you will need to look at the annual percentage yield (APY) paid on the account, as well as details such as minimum deposit amounts, fees and other important features too. Read also Check Out How Much Money You Should Have in Your Savings At Every Stage Of Life
Processes Involved In Getting a Savings Accounts Opened
If you want to pen a savings account, it should take less than an hour or less. The easiest way to open an interest bearing savings account is to find a bank you trust and open it by visiting the bank with valid documents or through an online application. If you wish to do it in person, visit a local bank branch and talk to them about opening an interest bearing savings account “definition”.
To open an account, at least you must be 18 years or older to be able to open an interest bearing savings account. Although specifics vary from bank to bank, so it helps to ask if you want to open a savings account for a lesser age. There are many alternatives available, check what your bank offers before you open an account for your child or yourself. Read also How To Save Money Every Month With These Simple Monthly Savings Tips
Factors To Consider When Opening An Interest Bearing Savings Account “Definition”
Other aspects to consider when looking into savings accounts are,
√ Different banks – Compare and review the interest rates, fees and minimum balance requirements before you open an account.
√ Credit unions – If you are thinking of a credit union, verify that you are eligible to join by searching for that information online or call the credit union and inquire about opening an account.
√ The information you need – Make sure you have all the information you need to open an account. For instance, you might need to go along with a government-issued identification be it driver’s license, military ID, or other ID), your Social Security number and a mailing address.
If you find yourself looking at institutions you are not familiar with, be sure that they are insured that’s for credit unions. Read also Banks With The Best High Interest Savings Account
Does It Cost To Have a Savings Account?
Savings accounts are typically free, but there are limitations and some potential costs as well. Accounts generally have minimum balances you require to maintain in your newly opened interest bearing savings account “definition”. Banks usually charge a monthly or annual fee or both, if you do not maintain the required minimum balance in your account. The fees will be withdrawn from your account, however, overdraft fees may be possible if the account balance drops to zero of course, but credit unions don’t charge fees the same way banks do. Instead, most put a hold on a specified amount that you must deposit when you open your account. For instance, if the amount required is $25, you will have to deposit that money to start your account and you wouldn’t have access to it for as long as your account remains open.
Also, other banks or credit unions will waive fees for a savings account if you have another account with that institution. You might be charged fees if you close your checking or salary account while keeping the savings account, because the accounts are typically bundled together. Read also How To Apply For Personal Loan With Susu Savings
2. Online Savings Accounts
Whiles most people go to their local bank when they want to open a savings account, it’s likely that the rates you will find there will be relatively low. To get the best possible interest rate, you might consider an account other than a traditional savings account.
An Online-only accounts are a great option for higher earnings and lower fees for you. Online banks don’t have the same overhead costs as compared to the brick-and-mortar banks. The result of lower fees is that, you can find many of the highest-yield savings accounts at online banks. Many online banks also allow you to get started with no minimum deposit, some of the higher-yielding accounts require larger deposits though. In spite of being online banks with no physical branches, you will often get an ATM card for withdrawing your money. You can also transfer funds to or from your local bank or credit union electronically in about three business days. Adding money, you can deposit checks with your mobile device as simple as that. Read also How To Start An Emergency Savings Fund Easily
3. The Money Market Accounts
Another alternative of interest bearing savings account is money market. Just as savings accounts, money market accounts pay interest on your deposits and limit how often you can make certain transfers as well. They typically pay more than savings accounts though and it’s easier to spend your money too. If you are interested in comparing accounts, you should look for accounts with the best rates to do that
Money market accounts usually provide a payment card or checkbook which you can use for spending up to three times each month, these are essential for emergency savings or large infrequent payments. Read also 10 Best Ways To Build Wealth Quickly With Or Without Money
4. Certificates of Deposit (CDs)
Also, a great alternative of interest bearing savings account “definition” is the Certificate of Deposits. If you can commit to leave your savings untouched for at least six months, you might be able to earn more in a Certificates of Deposits. These accounts come with different time commitments and you may have to pay a penalty if you cash out early too. Some Certificates of Deposits are flexible with penalty-free early withdrawals, but the flexibility usually comes with a slightly lower rate in that. Read also 20 Creative Strategies To Save Money In Daily Life – The Smart Guide To Gain Control Of Your Financial Future
In Conclusion
A savings account is a bank-offered service, which allows you to store your money while earning interest on your deposits as interest bearing account.
You earn interest, because you are lending money to the bank, which lends it to other people and businesses as well.
To use your saved money, you will usually have to move funds out of a savings account.
If you are interested in earning higher interest rates, you might consider different options to a savings account. Such as money market, certificate of Deposits and online savings account.
Kindly Join Our WhatsApp Forum And Facebook Page For More Updates!
21 Woeful Budgeting Mistakes To Avoid Right Now
8 Simple Ways To Grow Your Bank Account In A Month