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A savings account is an account maintained by a commercial bank,
credit union, and savings associations. The purpose of the account
is to gain funds (interest) over time for simply allowing the institution
to maintain the account. Funds may be deposited or withdrawn at
any time. Savings accounts are completely liquid assets. The can
may be owned by one or more people.
Savings accounts are insured by the Federal Deposit Insurance Corporation
(FDIC). This means if the financial institution you hold the count
with it goes at a business your money is guaranteed. On the record
no one has ever lost their money since the FDIC began insuring accounts.
Some accounts require minimum balances in order to avoid a maintenance
fee charge. Some accounts require funds to be held for a period
of time, most accounts permit unlimited access to funds. If the
minimum balance is not maintained, the account holder incurs a penalty
or free.
The account holder is provided interest paid to them, usually,
a monthly basis. The interest is based on the average balance the
account maintained during a fixed length of time. Interest rates
are set by bank based on the financial landscape of the current
time. Interest rates can be stated by banks by two methods. The
Annual Rate of Interest (APR) does not take into account the compounding
of interest within a year. Few banks listed APR quotes, as they
are not attractive as compared with APY quotes. Annual Percentage
Yield (APY) on the other hand is often quoted. APY quotes take into
account the compounding of interest and are therefore higher as
a flat rate.
The main feature of a savings account is a convenience. Many banks
provide customers with ATM access to the money. With the advent
of the Internet banks have slowly transition their business to the
online space. The online space has greatly lowered the overhead
involved and financial institutions and greatly increased the scalability
of their business. The online space allows banks to do business
with him many more people while keeping their costs lower than ever.
For this reason, banks offer more attractive interest rates to lure
potential clients. In this case the online world is a win-win situation
for customers and banks.
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