Savings accounts are opened by individuals to establish a regular habit of saving money by putting aside some amount for any expected or unexpected expense. Savings accounts are Federal Deposit Insurance Corporation or FDIC-insured bank deposits that earn a rate of interest. These accounts enable account holders to make withdrawals at any time, but put restrictions on the number of withdrawals per month. Additionally, it is generally not possible for account holders to use checks for transactions through their savings accounts. In case writing checks is allowed for certain saving accounts, the cost is more in comparison to a checking account. Savings accounts offer interest rates on the amount of money deposited that may vary according to the policies of a particular financial institution.
Though saving accounts are aimed at providing interest on the account balance, the rates offered are usually lower than the market rates. Saving account rates offered by some of the leading banks such as Emigrant Direct, HSBC and ING Direct are 4.25% APY (Annual Percentage Yield), 4.8% APY and 3.8% APY respectively. Some financial institutions offer promotional savings rates for a limited period of time in a bid to attract customers. If customers choose a savings account after the promotional time period expires, they will be offered the existing savings rates. Some financial institutions offer promotional rates to people opening a new account with their organization. However, in every case, the fine print must be understood before choosing any saving account.
Saving account rates are determined by financial institutions on the basis of the volume of business generated and the total operational cost. Due to these reasons, the interest rates offered by Internet-only banks are much higher than the conventional banks. Traditional banks have to invest in the administrative costs that are utilized in day-to-day costs. With Internet-only banks such administrative costs are eliminated and these banks can share their saving with their patrons by offering high interest rates.
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