A savings account is a deposit account held at a retail bank that pays interest but cannot be used directly as money in the narrow sense of a medium of exchange (for example, by writing a cheque). These accounts let customers set aside a portion of their liquid assets while earning a monetary return.
The other major types of deposit accounts are the transactional account (usually known as a “checking” (US) or “current” (UK) account), money market account and time deposit.
In the US, the term “savings deposit” includes a deposit or an account that meets the requirements of Sec. 204.2(d)(1) of Regulation D (FRB). The depositor is permitted to make up to 6 pre-authorized transfers or withdrawals (excluding withdrawals via an automated teller machine) per month or a statement cycle of at least four weeks. There is no regulation limiting the number of deposits into the account. Violations of Regulation D often involve a service charge, usually $10 per transaction, or even a downgrade of the account to a checking account.
A savings account linked to a checking account at the same financial institution can help prevent fees due to overdrafts and reduce banking costs.
- ^Amy Fontinelle. “Banking: Savings Accounts 101”.