skip to main content

Advantages and Disadvantages of a Savings Account

Are you trying to save money but are unsure of where to start? Consider opening a savings account, which is an interest-bearing deposit account that is often kept at a bank or financial institution. Keep reading to learn about the advantages and disadvantages of a savings account and if opening one is right for you and your financial situation.

Advantages of a Savings Account

open a savings account today

There are many benefits to opening a savings account, such as:

Earning Interest

A savings account, as opposed to a checking account, allows you to grow your savings with interest. Although the average savings account only offers 0.06% APY, some banks offer higher interest rates.+  

Easy Access to Funds

Experts believe it is much easier to access your money in a savings account as opposed to a certificate of deposit (CD) or money market account. You can transfer funds to another account, use them for bill payments and even make transfers to credit or debit cards. 

If it’s an online account, you may have 24/7 access to your funds. However, there is often a transaction limit on how many withdrawals you can make within a given period, although ATM withdrawals and transactions in person generally don’t count toward the overall limit.

FDIC Insurance

It’s always a good idea to have an FDIC-insured account. The Federal Deposit Insurance Company insures up to $250,000, per depositor for each ownership category. 

If you have more than $250,000, consider opening a different type of account, such as a joint account, in order to insure more of your savings—just be aware that a joint owner will have full access to any funds in the account.

Disadvantages of a Savings Account

plan for your retirement today

Now that you know the advantages to opening a savings account, here are some disadvantages you might want to consider:

Limited Withdrawals

Even though you have easy access, there is typically a six-transaction limit per month.* This transaction limit is a Regulation D rule put in place to encourage people to save their money—so in fact, it’s meant to help you in the long run. As long as you’re not using your savings account as your main account, this shouldn’t be a problem. 

Lower Chance of Personal Interaction

Having 24/7 access to your account is great, but one problem with online banking is that you don’t get the opportunity to build a relationship with the teller or a personal banker. However, if you’re extremely busy, this might be an advantage since you can manage your funds more efficiently. 

Interest Rates

Unlike many checking accounts, savings accounts offer interest on funds. However, the interest rates are usually lower than certificate of deposit (CDs) depending on the bank.

Open a Savings Account at Synchrony Bank

Now that you know the advantages and disadvantages of a savings account, consider opening one at Synchrony Bank. Ranked as the Best Savings Account according to GOBankingrates.com,** our banking representatives can help you determine if a savings account is the right option for you. Call 844-345-5789 or open an account today to start saving.

—————–

Sources:

Investopedia: http://www.investopedia.com/terms/s/savingsaccount.asp

Money.cnn.com: http://money.cnn.com/2013/10/01/pf/savings-account-yields/index.html

NerdWallet: https://www.nerdwallet.com/blog/banking/how-regulation-d-affects-your-savings-withdrawals/ 

Federal Deposit Insurance Corporation: https://www.fdic.gov/deposit/deposits/

Federal Deposit Insurance Corporation: https://www.fdic.gov/deposit/covered/notinsured.html

Federal Reserve: https://www.federalreserve.gov/boarddocs/supmanual/cch/int_depos.pdf

GOBankingRates: https://www.gobankingrates.com/banking/best-savings-accounts/

+National Average APYs are based on specific product types of top 50 U.S. banks (ranked by total deposits) provided by Informa Research Services, Inc. CD Rates: Average APYs are based on certificate of deposit accounts of $25,000. High Yield Savings Rates: Average APYs are based on High Yield Savings Accounts of $10,000. Money Market Account Rates: Average APYs are based on Money Market Accounts of $10,000. Although the information provided by Informa Research Services, Inc. has been obtained from the various institutions, accuracy cannot be guaranteed.

*Federal regulations limit the number of electronic and telephone transactions you can make with your savings or money market account to six transfers or withdrawals per monthly statement cycle. If you exceed these limits, we may close your account.

**https://www.synchronybank.com/awards/


Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now

×