A savings account is a
bank account
A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions between the bank and a customer are recorded. Each financial institution sets the terms and conditions for each type o ...
at a
retail bank
Retail banking, also known as consumer banking or personal banking, is the provision of services by a bank to the general public, rather than to companies, corporations or other banks, which are often described as wholesale banking. Banking servi ...
. Common features include a limited number of withdrawals, a lack of cheque and linked
debit card
A debit card, also known as a check card or bank card is a payment card that can be used in place of cash to make purchases. The term '' plastic card'' includes the above and as an identity document. These are similar to a credit card, but u ...
facilities, limited transfer options and the inability to be overdrawn. Traditionally, transactions on savings accounts were widely recorded in a
passbook
A passbook or bankbook is a paper book used to record bank or building society transactions on a deposit account.
Traditionally, a passbook was used for accounts with a low transaction volume, such as savings accounts. A bank teller or postma ...
, and were sometimes called passbook savings accounts, and
bank statements were not provided; however, currently such transactions are commonly recorded electronically and accessible online.
People deposit funds in savings account for a variety of reasons, including a safe place to hold their cash. Savings accounts normally pay interest as well: almost all of them accrue
compound interest over time. Several countries require savings accounts to be protected by
deposit insurance
Deposit insurance or deposit protection is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of ...
and some countries provide a government guarantee for at least a portion of the account balance.
There are many types of savings accounts, often serving particular purposes. These can include accounts for young savers, accounts for retirees,
Christmas club
A Christmas club is a special-purpose savings account, first offered by various banks and credit unions in the United States beginning in early 20th century, including the Great Depression, under which bank customers deposit a set amount of money ...
accounts, investment accounts, and
money market accounts. Some savings accounts also have other special requirements, such as a minimum initial deposit, deposits made regularly, and notices of withdrawal.
Regulations
United States
In the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
, Sec. 204.2(d)(1) of
Regulation D (FRB)
Reserve Requirements for Depository Institutions (, Regulation D) is a Federal Reserve regulation governing the reserves that banks and credit unions keep to satisfy depositor withdrawals. Although the regulation still requires banks to report the ...
previously limited withdrawals from savings accounts to six transfers or withdrawals per month, a limitation which was removed in April 2020, though some banks continue to impose a limit voluntarily as of 2021. There is no limit to the number of deposits into the account. Violations of the regulation may result in a service charge or may result in the account being changed to a checking account.
Regulation D sets smaller
reserve requirement
Reserve requirements are central bank regulations that set the minimum amount that a commercial bank must hold in liquid assets. This minimum amount, commonly referred to as the commercial bank's reserve, is generally determined by the centra ...
s for savings account balances. In addition, customers can plan withdrawals to avoid fees and earn interest, which contributes to more stable savings account balances on which banks can lend. A savings account linked to a checking account at the same financial institution can help avoid fees due to overdrafts and reduce banking costs.
High yield savings accounts
High yield savings accounts, sometimes abbreviated to HYSA, are a type of savings account with higher interest than normal savings accounts. These accounts typically earn 10 times more in interest than a normal savings account. HYSAs can be a good option for short-term investing.
India
In India, Savings Bank did not exist at most banks in India. Customers only relied on fixed deposits for their savings.
Canara Bank (earlier Canara Banking Corporation Limited) introduced the concept of a Savings Bank account in 1920 with very stringent norms. A customer could deposit minimum Rupee one and maximum Rupees one thousand. He was not allowed to carry a balance beyond Rupees two thousand.And most important the customer could not withdraw his money whenever he wanted to, he had to give three days' notice to the bank to withdraw his money. Banks found innovative ways of adding to their income from Savings Accounts. For every passbook, the customers were asked to pay 25 paise(now given free of cost). Besides banks enjoyed the freedom to fix the interest rate on deposits on the lowest credit balance of any one day of each month. For some time the rate of interest on Savings Account in Indian Banks were regulated by Reserve Bank of India. Now again it is decided by individual Banks in India but they are to follow the
Know your customer
Know Your Customer (KYC) guidelines in financial services require that professionals make an effort to verify the identity, suitability, and risks involved with maintaining a business relationship. The procedures fit within the broader scope of a ...
guidelines introduced in 2002.
The bank deposits in Banks in India is insured by
Deposit Insurance and Credit Guarantee Corporation
Deposit Insurance and Credit Guarantee Corporation (DICGC) is a specialised division of Reserve Bank of India which is under the jurisdiction of Ministry of Finance, Government of India. It was established on 15 July 1978 under the Deposit I ...
formed by an act called ''The Deposit Insurance and Credit Guarantee Corporation Act, 1961''. The limit of insurance at present is Rupees five lakhs only.
References
External links
Savings Account Definition , InvestopediaWhat Is a Savings Account? , The Balance
{{DEFAULTSORT:Savings Account
Bank account
Interest-bearing instruments