What is a traditional savings account?

Elements of traditional savings accounts

Classic or traditional savings accounts are offered by every financial institution in the U.S. and throughout most of the world. In America, banks, credit unions, savings and loan associations, and mutual savings banks all offer one or more types of savings account. These options are designed to permit you to deposit and withdraw money with few restrictions and to earn interest at regular, specified intervals.

As use of the Internet increases, the online savings account is also becoming more popular. Since you can access these accounts on a 24/7/365 basis, you can transfer monies in and out of your accounts whenever you wish.

While you may have few restrictions on transactions and enjoy unlimited access, a savings account should rarely be used like a demand (checking) account. Those who try often find that the lack of “transaction” features, like checks, can make for a cumbersome bill paying ability.

Interest paid on a savings account may occur as often as daily or as rarely as annually. Typically the more often interest is posted to your savings account, the lower the interest rate will be. However, the wonderful effects generated by “compounding” may increase your APY (Annual Percentage Yield) on a daily or monthly interest posting account to a level close to the higher rates offered by less frequent interest postings.

Traditional savings accounts may also offer different options at the discretion of your financial institution. For example, you might be offered a savings account that has different interest rate levels depending on your balance. As your balance increases, you might reach levels (e.g., $2,500, $5,000, $10,000, etc.) that earn you higher interest rates.

You can use the ability to manage an online savings account to increase or decrease your balance to maximize your interest earnings with some of these more “interesting” savings options.