In terms of money management, savings accounts are some of the most powerful tools at your disposal. Not only are these electronic devices extremely convenient, but they offer a host of additional benefits which are all designed to keep your funds safe and secure at all times. However, these advantages can sometimes be counterbalanced by a few notable drawbacks. If you are planning on applying for a savings account or even if you are thinking about switching banks, it is a good idea to take a quick look at both sides of the proverbial coin in a bit more detail. Let's begin.
The Intention of a Savings Account
This is arguably the most straightforward concept to address. Any savings account provides users with an ability to deposit their funds electronically. However, the main takeaway point is that such an account is also associated with a certain amount of interest (known as an APR or annual percentage rate). This interest will help to add to the total amount of funds over time. Maintenance expenses tend to be lower when compared to standard debit accounts and as long as the money remains within the savings account, it will not be subject to any form of taxation.
Other Benefits
Fiscal security is another important concern. All savings accounted offered by banks within the United Kingdom are insured for up to 75,000 pounds. So, the user can remain confident in the fact that his or her funds are protected even in the event that the bank itself collapses or another financial crisis occurs in the future. Finally, savings accounts are associated with excellent levels of customer service. Any questions or issues are normally addressed promptly.
Are There Disadvantages?
Although savings accounts offer a higher rate of interest when compared to checking or debit accounts, this rate is much lower than other vehicles such as certificates of deposit (CDs) or treasuries. Another possible problem is that come banks may limit the number of withdrawals that are allowed within a given period of time (generally expressed in terms of months or financial quarters). A final issue could revolve around the minimum balance limits associated with an account. Dipping below this limit could result in penalties. However, this is generally not relevant for most consumers; they intend to use these accounts for savings as opposed to regular withdrawals.
The Bottom Line
Savings accounts are very effective tools to keep your money safe and to earn a bit of interest while doing so. They could be particularly relevant in the event that you wish to deposit a large sum and let it mature for a significant length of time. Regardless of your intentions, it is always important to perform a good deal of research in advance. Take a look at the institution in question. What is their overall reputation? Will you be able to monitor your account via an online portal? Does the provider offer access via a mobile phone? Will their interest rates change over time? What are the withdrawal limits? With a bit of research and effort, there is no doubt that you will be able to choose the most appropriate variant for your needs.
