how savings accounts work
savings and other deposit accounts are secure bank accounts used to story your funds while potentially earning interest for banks they are important sources of funds for lending for that reason you can find savings accounts at virtually every bank or credit union whether they are traditional brick and mortar institutions or operate online in addition some investment and brokerage firms offer savings accounts savings account interest rates vary with the exception of promotions promising a fixed rate until a certain date banks and credit unions might change their rates at any time typically the more competitive the rate the more likely it is to fluctuate changes in the federal funds rate can trigger institutions to adjust their deposit rates some institutions offer high yield savings accounts with significantly higher interest rates for larger minimum deposits which may be worth investigating some conventional savings accounts require a minimum balance to avoid monthly fees or earn the highest published rate while others have no balance requirement know the rules of your particular account to ensure you avoid diluting your earnings with fees money can be transferred in or out of your savings account online at a branch or atm by electronic transfer or by direct deposit transfers can usually be arranged by phone as well some banks limit withdrawals to six per month if you exceed that the bank may charge a fee close your account or convert it to a checking account the amount you can withdraw is unlimited so you can withdraw up to the amount in the account 1just as with the interest earned on a money market certificate of deposit or checking account the interest earned on savings accounts is taxable income the financial institution where you hold your account will send a 1099 int form at tax time whenever you earn more than 10 in interest income the tax you ll pay will depend on your marginal tax rate 2pros and cons of savings accountseasy to usecan be linked to checking accountwithdraw balance at any timeup to 250 000 is federally insuredpays less interest than other optionseasy access can make withdrawals temptingmay require minimum balance