Advantages and Disadvantages of Savings Account
Putting the money saved money into a savings account is what everyone does for financial safety. That‘s exactly a savings account if for. This type of bank account has long-term uses and benefits as you manage your money through a bank. But also remember that you lose control by putting money in the bank as it’s deposited in a banking organization. The Advantages and Disadvantages of Savings Account inspect other concerns to help you make the right financial decision.
What are the Advantages of a Savings Account?
From least hassles to ease of operating, there are plenty of advantages of opening a savings bank account. Depositing money into safe hands next to you, which also grows over time, is beneficial for individuals. Here are some reasons why a Savings bank account seems a good option to save your hard-earned money.
1. Interest is one of the biggest Advantages of Savings accounts
Although a savings account doesn’t double the amount instantly, the interest accrued is like a drop in the ocean that would increase the sum after some time. With many savings accounts having an interest rate of about 2%, you will still accrue interest over time with an account.
This means you have more earning potential with your deposited money compared to keeping it at home. Also, the money you deposit is safe in case a tragedy happens. It’s always protected against theft and natural disasters.
2. Online Banking
These days, all the banks and credit unions give the consumer the freedom to access or transact through online banking. This means you can use check-in or transfer the money through wire anytime, anywhere, to anyone you want.
Having online access to your funds 24/7 is one of the advantages of Savings account. All you need to have is a data connection or access to the internet. Many institutions give you an option to link your savings account to other accounts. You may have to make banking processes hassle-free. Eventually, you won’t have to spend hours at the banks to carry out minor transactions.
3. Your money is in safe Hands
Putting your investment in the savings bank account gives you power over your hard-earned money. By doing so, you are not only assured of its safe against robbers but also guaranteed that in case something happens to the bank’s lockers, your money will be returned to you by the banking institution. Keeping money in the bank’s safety deposit room also comes as one of the notable advantages of a savings account as there are the least taxes to pay.
4. You can open a Savings Account with very little money
You can deposit the minimum amount (Account opening balance) into your savings bank account to start using banking services right away. The account opening process these days take a few formal procedures. After your account is up and running with the minimum account balance, you can start baking operations the same day.
5. Safest Option for a rainy day
Financial security is one of the considerable advantages of opening a savings account. A savings bank account allows you to store cash in case of an emergency. If you lose your job, you can depend on your savings account to cover your monthly expenses. Most banks have launched their secured apps that come integrated with billing systems. So, you can pay your electricity bills and insurance premium while binge-watching or taking your pet for a walk.
What Are the Disadvantages of a Savings Account?
It can be difficult to balance the benefits with the Disadvantages of a Savings Account with so many things to consider. Selecting the bank, minimum balance, interest rates, and Terms & conditions is a challenge for many consumers to adhere to. If you’re considering opening a savings account or here are some cons of a savings bank account, you need to keep in mind.
1. Interest is often compounded or annually
Provided the rate of interest compounded is low, most traditional banks will only compound your interest either monthly or annually. The rate of interest depends directly on the deposited amount. You can only get benefit of compound interest when you have a considerable amount in your account. This infers that the full potential of your money isn’t always realized, especially when compared to other investment opportunities.
2. Withdrawal limits- biggest Disadvantage of Savings Account
You can transfer the fund easily from your savings bank account to another. Unfortunately, you can’t have this advantage for unlimited transactions. Every banking institution follows protocols set by the government, due to which they have to track every financial movement.
As a result of tracking or avoiding illicit funding, savings account holders must restrict their withdrawals. On the contrary, current or checking accounts are registered under the business category. That’s why they don’t have such restrictions. However, to initiate a large transaction through a savings account, you’ll be asked to provide certain details and the purpose of withdrawing or depositing the sum.
3. Private banks Charge for Minimum Account balance
Although private banks may offer a higher interest rate to consumers, they require a minimum balance. In case your savings fall below the minimum amount, you will be charged a pre-defined fee. You must keep the minimum balance in your savings account if you don’t want to lose your money on maintenance fee.
4. Some financial institutions charge fees for Every Transaction
For every withdrawal through Debit Cart, the bank charges a processing fee. This fee can be higher depending on the amount. These charges are not often disclosed to the consumers by the bank as they also deduct them in the form of maintenance charges for Internet banking services or SMS alerts.
5. When you have money, you spend more
Money tempts you more as you have more of it. You are most likely to buy things recklessly and spend your earnings on useless things. Easy access to your savings account adds fuel to the fire as you head straight to online shopping and order items from your home. For this reason, you should consider an alternative to investing in Mutual Bonds to endure the money invested isn’t readily available for irrelevant spending.
If you have more than what you can spend, investing the rest of the money into Certificate Deposits, Mutual Funds, or Stock Exchange come as a secondary option. Once you assess the Advantages and Disadvantages of Savings Account, it’s better to keep some money in the savings account for an emergency. You can invest the rest of the amount in other options considering its scope and use in the future.