Savings accounts are bank accounts that have higher rates of interest than ordinary working accounts. Since the arrival of the ING Direct Savings Maximiser nearly all major financial institutions offer them. Major characteristics include:
- high rate of interest
- little or no fees
- linked to your other bank account not necessarily with same institution
- do not usually have an card to allow withrawals from ATM’s
The major point of comparison is the interest rate.
Quite often banks offer enticement deals to new account holders which pay bonus interest on top of their usual interest.
Things to watch out for include, how long is the bonus rate of interest paid, are there penalties for withdrawals, what is the rate of interest after the bonus period finishes.
There are also a subset category which rewards account holders for additional regular deposits and for not withdrawing funds. These are useful for targetted savings goals.
If you do not wish to direct your surplus cashflow into your mortgage (assuming you have one) then these are a smart place to hold your cash.
Most everyday working accounts offer micro rates of interest if at all. Think 0.1% pa. This is important to know because of the decaying purchasing power of your money due to inflation. This can add up substantial losses if you have sizeable cash funds.