Savings account

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.

Regulations[edit]

United States[edit]

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.

Because Regulation D lets banks hold back smaller reserves against savings account balances, they are allowed to lend a larger percentage of those balances. In addition, the regulation encourages savers to plan their withdrawals to avoid fees and earn interest, which contributes to more stable savings account balances on which banks can lend. A savings account linked to a checking account at the same financial institution can help prevent fees due to overdrafts and reduce banking costs.[1]

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