A savings account allows you to earn on bank interest, but at the same time use your money without restrictions. It sounds attractive, but why then the manager of another bank tries to attract your attention with a credit card on special conditions or with an approved loan right now but does not offer to open a savings account? What is the secret of such an account and what opportunities does it give to an ordinary person? Let’s find the answers to these questions together.
What is a savings account in simple words?
A savings account is an open bank account that offers not only interest from keeping funds but also the ability to withdraw part of the deposit without losing them at any time.
A savings account resembles a demand deposit, but the rates are higher. At the request of the client, it can be replenished or withdrawn at a convenient time.
Features of savings business accounts:
- Average level of profitability varies in the range of 4-6% per annum;
- Some banks introduce an additional condition – the requirement for the minimum amount on the account, for example, $500. In this case, in order to receive the interest declared by the bank, you must always have at least this amount on the account;
- Income as a percentage of the amount, as a rule, is credited to the client’s bank account on a monthly basis.
Opening a savings account is beneficial for those who plan to spend sav-ings on their own needs. There is no link to the timing of receipt of money, so savings can always be used.
Differences between a savings account and a deposit
The terms of savings accounts differ from classical deposits. They are different products for different situations.
| Deposit | Savings account |
| Bank deposits are most often opened for a certain period. The amount of the deposit is also usually determined in advance and is not changed during the entire investment period. | The savings account is intended both for storage and for the constant movement of funds. |
| The movement of funds on deposits for a certain period is limited. Replenishment of a term deposit is not always allowed, and the added funds are not always combined with the initial deposit to accrue interest on a larger amount. | Top-ups are added to the principal and in-crease the interest base. This usually happens once a month. |
| Withdrawing money from a term deposit is rarely allowed. And if it is possible, then the client is charged a fine, the accrued interest is usually lost. | Partial or complete withdrawal of the deposit is allowed without penalty. The only possible loss of interest for the last settlement period is usually one month. |
| The interest rate on a term deposit is set right away and does not change until the end of the term. Although exceptions are possible when the interest is tied to some kind of changing rate. | Interest rates on savings accounts are changed by banks unilaterally, without agreement with the client. |
| Deposits are chosen by those who have already collected a certain amount and are not going to spend it in the near future. | Savings accounts are suitable for those who do not have a large amount and do not know exactly their financial plans. |
But these are all general trends, not binding rules. You should find out the full terms of the savings account before opening it.
Pros and cons of a business savings account
Now let’s determine how beneficial it is to open a savings account and what difficulties its holder faces.
Benefits of a savings account:
- The interest is higher than on demand deposits, while you can withdraw part of the funds without closing the account;
- You can a savings account for an indefinite period;
- Some financial institutions allow capitalizing the accrued interest, that is, income in the form of interest on the account is transferred to the same account, thereby increasing the amount on the account. In the next month, the client will already receive more income since the amount has increased.
Disadvantages:
- To receive an increased annual rate, you need to deposit a large amount on the balance;
- If there is a requirement for the minimum amount, it is necessary to “freeze” it on the account and make sure that it does not decrease – other-wise the bank will transfer the client to a reduced percentage;
- Some banks mention in the agreement that the interest rate is floating, so the investor cannot count on a constant income;
- Interest rates on the account depend on the balance: the larger it is, the higher the yield;
- Some banks establish their own rules for using the account, for example, linking to it a debit plastic card, and this is a charged service.
How to make money on savings accounts?
You can only make money if you choose the best online business savings account. Before signing a service agreement, study the conditions for opening an account in detail. Pay attention to the fact that the accrual of interest is daily.
If you have opened a savings account with a link to a card and a minimum limit on non-cash purchases, first deposit money into the account, and then make the purchase. This simple trick will help you get the expected return on your deposit.
How to open a savings account?
Before opening an account, make a rating of banks that offer favorable conditions. Do not chase an excessively high percentage but carefully read the agreement (posted on the official website of the bank). There are often cases when significant restrictions are hidden behind the increased profit-ability, the accrual of interest on the monthly balance and other tricks.
Account opening methods:
- Visit to the bank;
- Using internet banking or submitting an application through the bank’s website.
When visiting a bank office, you need to have an ID and the amount of money that you plan to deposit. You sign an account service agreement and deposit funds. In addition, the bank often offers a plastic debit card for non-cash payments and cash withdrawals.
Alternatives to a savings account
We examined the possibilities of a business savings account. Now, let’s take a quick look at the possible alternatives:
- Deposit in the bank;
- Demand deposits;
- IIS (individual investment account);
- Unit investment fund;
- ETF (Exchange Traded Fund).
Thus, a savings account is a great opportunity for a businessman to earn from 4 to 7% per annum on savings. You can withdraw money for any needs and your funds are completely safe.