Key Takeaways:
- Savings accounts offer easy access to funds. You may also get the added benefit of connecting your savings account to your checking account for automated
overdraft protection. - With FDIC insurance, savings accounts provide peace of mind, ensuring up to $250,000** of your savings is protected.
- Savings accounts allow your money to work for you by earning interest over time and facilitating automatic bill payments, contributing to effective financial management.
4 Key Advantages of a Savings Account: Access, Security and More
Your hard-earned money deserves a good home.
With a savings account, you can maintain your savings in a liquid state—meaning you can access your funds whenever you want—while also putting some space between your savings and your daily spending needs.
Let’s look at four key advantages of a savings account, and how this financial tool can be an effective way to store your money in a secure location where it can earn interest.
Advantage #1: Get easy access to your funds
In an ideal world, your money could sit and grow in a savings account. However, life rarely works out that way. Unexpected expenses, car repairs and more can create a situation where you need your money now.
That’s where accessibility comes in. Once you have a savings account in place, you can make transactions at any time using your bank’s web portal, an ATM or by visiting your local banking center. Within
minutes, you can turn your account balancing into cash or transfer funds to your checking account to make payments.
If you have a checking account with your bank, it’s easy to move money between your accounts.* Further, many banks allow you to connect your checking and savings accounts so you can avoid overdraft fees.
For example, say you use your debit card to make everyday purchases, like fueling your car or grabbing a bite to eat at your favorite restaurant. Your debit card uses the funds within your checking account. If your account hits zero, you risk incurring overdraft fees.
However, by connecting your savings account, you benefit from the convenience of automatic overdraft protection—if your checking account is overdrawn, any remaining funds necessary for the purchase will come out of your savings account.
Many financial institutions charge a fee for overdraft service. At Comerica, we help our clients avoid overdraft situations by offering free Automatic Overdraft Protection (AOP). Clients can link a Comerica Checking Account with one of our Savings Accounts, Money Market Accounts, Credit Cards, or Home Equity Lines of Credit (HELOC), and set up AOP at no additional cost. Check with your financial institution for any fees associated with overdraft service.
Most savings accounts offer online and in-person access. Savings accounts may also offer overdraft protection, sometimes with an associated fee.
Advantage #2: Gain peace of mind knowing your money is insured
When you deposit your money into a bank, the last thing you want to worry about is whether it will be there when you need it.
Savings accounts held at financial institutions that are members of the Federal Deposit Insurance Corporation (FDIC), like Comerica Bank, are automatically insured for up to $250,000.**
What does this mean?
Essentially, up to $250,000** of your savings is backed by the federal government in the event of theft or bank failure. Today, it is highly unlikely that an established bank would fail, but it’s important to understand why the FDIC was created.
The FDIC’s history traces back to the Banking Act of 1933. During the early years of the Great Depression, thousands of banks failed and were unable to return money to their customers. The FDIC ensures such a catastrophe is highly unlikely to happen again.
Therefore, if you deposit your savings into an FDIC-insured account, up to $250,000** of your funds will always be available to you.
The FDIC insures up to $250,000** per depositor for member banks.
Advantage #3: Earn interest on your savings
Your money should work for you.
That’s where interest comes in. Many savings accounts earn interest over time, meaning your money will grow—and you don’t have to lift a finger!
Here’s how savings account interest works at a basic level:
Let’s say you put $1,000 into a savings account earning 1% interest. After you deposit your funds, the bank essentially borrows the money and lends it to other customers. But rest assured, you can always withdraw your money at any time.
The bank charges customers a higher interest rate for products like loans and financing, in part, so that it can pay you the 1% interest on your account. So, at the end of one year, if you deposited no extra money into your account, your balance would be $1,010. The more money you place in the account, the more you will gain in interest.
Keep in mind that your interest rate may be less than 1%—rates depend on many factors, including actions taken by the Federal Reserve System. However, even during times when interest rates are low, it’s still better than leaving your money under your mattress.
Interest rates vary from bank to bank. But even the lowest interest rate is still greater than holding your money in cash.
Advantage #4: Pay your bills on time, automatically
We all have bills. Obligations such as your rent, internet, and phone bills, utility bills and subscription services that may vary slightly or not at all from month-to-month.
Many banks allow their customers to set up automatic payments directly from their savings or checking accounts, helping you avoid potential late fees or missed payments. It’s important to note that
savings accounts have regulatory transaction limits, so many customers opt to set up automatic bill pay through their checking account. That said, savings accounts can be used for low-transaction bills or for overdraft protection, as discussed in Advantage #1.
Automatic bill pay is especially important for utility bills that could cause a major disruption to your life if you forget to pay them. Nobody wants water or power shut off simply because they forgot to
pay the bill. Further, automatic payments take stress out of your life each month. Instead of having to log in and make a payment, you can set up automatic withdrawals.
Together, the consistency and ease of payments save savings account holders hours of time and headache each year.
Automatic bill pay means few headaches and reduced fees.
Combine a checking account and a savings account for the best of both worlds
While a savings account is a great place to keep money that you intend to use for major purchases in the future, such as a down payment on a house, checking accounts are better suited for daily
purchases. Having both types of accounts allows you to keep your money organized for different purposes.
Many people choose to keep one or two months’ worth of expenses in their checking account and hold the rest of their funds in a savings or other long-term investment account.
Comerica Bank offers the Access Checking account, which gives you access to a number of benefits, including zero monthly fees for Comerica Web Banking and no-fee Comerica Web Bill Pay® with direct deposit. Our modest $50 initial deposit requirement makes it easy to get started today.
Ready to open a savings account?
At Comerica Bank, we offer industry-leading savings accounts. Take advantage of the best features of a savings account—access, security, interest, and bill pay—with a trusted partner who’s invested in your long-term success. To learn more, find your local Comerica or call us today.
*Terms and Fees Apply.
**The FDIC insurance coverage of $250,000 is based on each depositor at each institution. For example, if you hold multiple accounts at a bank, the $250,000 would be the sum total of all your accounts.
This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice.
This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.