Savings account

Savings account

Savings accounts are accounts maintained by retail financial institutions that pay interest but can not be used directly as money (by, for example, writing a cheque). These accounts let customers set aside a portion of their liquid assets while earning a monetary return.

Features

Savings accounts are offered by commercial banks, savings and loan associations, credit unions, building societies and mutual savings banks.

Obtaining funds held in a savings account may not be as convenient as from a demand account. For example, one may need to visit an ATM or bank branch, instead of writing a cheque or using a debit card. However, this transference is easy enough that savings accounts are often termed "near money".

Some savings accounts require funds to be kept on deposit for a minimum length of time, but most permit unlimited access to funds. In the US, Regulation D, 12 CFR 204.2(d)(2)] limits the withdrawals, payments, and transfers that a savings account may perform. [http://www.access.gpo.gov/nara/cfr/waisidx_01/12cfr204_01.html] Banks comply with these regulations differently; some will immediately prevent the transfer from happening, while others will allow the transfer to occur but will notify the account holder upon violation of the regulation. True savings accounts do not offer cheque-writing privileges, although many institutions will call their higher-interest demand accounts or money market accounts "savings accounts."

All savings accounts offer itemized lists of all financial transactions, traditionally through a passbook, but also through a bank statement.

Regulations

In the United States, under Regulation D, 12 CFR 204.2(d)(2), the term "savings deposit" includes a deposit or an account that meets the requirements of Sec. 204.2(d)(1) and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor is permitted or authorized to make up to six transfers or withdrawals per month or statement cycle of at least four weeks. The depository institution may authorize up to three of these six transfers to be made by check, draft, debit card, or similar order drawn by the depositor and payable to third parties. There is no regulation limiting number of deposits, however some banks may choose to limit deposits themselves.

Within most European countries, interest paid on deposit accounts is taxed at source. The high rates of some countries has led to the development of a significant offshore savings industry. The European Union Savings Directive has made arrangements with many offshore financial centres for either information on interest earned to be shared with EU tax authorities or for withholding tax to be deducted on interest paid on offshore accounts, because of concerns relating to potential tax evasion. Account holders must either pay the withholding tax or disclose account holder information to relevant tax authorities. [http://www.ft.com/cms/s/ae51ab84-0d9f-11db-a385-0000779e2340.html]

Costs

Withdrawals from a savings account are occasionally costly and are sometimes much higher and more time-consuming than the same financial transaction being performed on a demand account. However, most savings accounts do not limit withdrawals, unlike certificates of deposit. In the United States, violations of Regulation D often involve a service charge, or even a downgrade of the account to a checking account. With online accounts, the main penalty is the time required for the Automated Clearing House to transfer funds from the online account to a "brick and mortar" bank where it can be easily accessed. During the period between when funds are withdrawn from the online bank and transferred to the local bank, no interest is earned.

Notice deposit account

In some countries, such as the United Kingdom and Burkina Faso, an account called the notice deposit account is available. A slight interest premium is paid, with the caveat that one must give up to 90 days notice to make a withdrawal without a fee. Often, withdrawals can be made without notice by paying a penalty equivalent to the interest earned in the notice period. This is in contrast to "instant access deposit accounts", which do not require notice for withdrawals. Notice deposit accounts are not common in North America.

ee also

* Personal account
* Transaction deposit
* Money market deposit account
* Christmas club

References

External links

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Look at other dictionaries:

  • savings account — ➔ account1 * * * savings account UK US noun [C] (also saving account) BANKING ► a bank account which earns interest on the money kept in it: »Students are being encouraged to open a savings account and manage their money. »an instant access/high… …   Financial and business terms

  • savings account — n. A bank account in which money is held and accumulated, as opposed to being spent regularly as in a checking account. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy Hackney Blackwell. 2008 …   Law dictionary

  • savings account — n. an account in a bank on which interest is paid …   English World dictionary

  • Savings Account — A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate. Depending on the specific type of savings account, the account holder may not be able to write checks from the account… …   Investment dictionary

  • savings account — noun a bank account that accumulates interest • Hypernyms: ↑bank account • Hyponyms: ↑time deposit account, ↑deposit account, ↑dormant account, ↑passbook savings account * * * noun, pl ⋯ counts [count] …   Useful english dictionary

  • savings account — UK / US noun [countable] Word forms savings account : singular savings account plural savings accounts a bank account that gives you interest on the money that you have in it …   English dictionary

  • savings account — {n.} An account in a bank, where people put money to save it, and the bank uses the money and pays interest every year. * /If you leave your money in your savings account for six months or a year, the bank will pay interest on it./ Compare:… …   Dictionary of American idioms

  • savings account — {n.} An account in a bank, where people put money to save it, and the bank uses the money and pays interest every year. * /If you leave your money in your savings account for six months or a year, the bank will pay interest on it./ Compare:… …   Dictionary of American idioms

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  • savings account — savings ac.count n a bank account in which you keep money that you want to save for a period of time, and which pays you ↑interest on the money you have in it →↑checking account, current account ↑current account …   Dictionary of contemporary English

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