Understanding Different Types of Savings Accounts

August 25, 2008 · Posted in Money 

Not all savings accounts serve the same purpose. In that same token, not all savings accounts are setup to cost the same to the account holder. Banks have come a long way, and have developed several types of accounts for their customers. Before you decide what account is best for you, you will want to have an understanding of the basic differences of savings accounts.

A lot of savings accounts will get your attention with flashy amazing interest rates, but that doesn’t mean that the account will continue to offer you what you are looking for in your savings account. Following is a look at a few basic savings account types to help you at least to be more prepared to ask appropriate questions to your banker when you are ready to open your next savings account.

How often are you going to putting money into the account? Is this account going to be receiving deposits on a monthly basis, or just here and there? Some accounts require you to pay a minimum amount each month. Some allow you to remove money whenever you want, and others, not at all until a certain amount of time has taken place. There are 401K’s where you can put a maximum amount away each year, and ideally not access it.

How often are you going to take money out? You can get a great rate of interest, but not usually if you plan to have your hands in it all the time. Can you do this? If you want to have access at any time you will probably have to settle for a lower rate of interest.

What will get out of the account? If you can put money in and not touch it, then a 401K is a great choice because you can get a great rate and get tax free interest as well. A regular savings account will reward you for putting money into the account each month, and standard accounts give you flexibility by letting you start with low amounts, and pay in and withdraw cash whenever you want.

Although, you can’t usually get a fixed interest rate forever, you can get a good rate and usually fix it for up to a year. This gives you a reason to get as much into it in the beginning as possible. These accounts usually limit the amount that you can put into them every month. Ideally, you want to find an account that has no limits, and a high fixed rate or longest term for that rate.

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