Types of savings accounts

What Are the different types of savings accounts?

Generally, there are several types of savings accounts. The three most commonly offered ones are the transaction account, term deposit, and online savings account. Regardless of all three being different types of savings accounts, they all have the same premise: deposit money into your account and earn interest.

All the different accounts may benefit you in different ways. With some accounts, you may earn higher interest, while with others you may have simpler access to your funds, also called liquidity. It depends on your financial goals and needs as to which account suits you best.

It’s important to note that savings accounts are different from checking accounts. Checking accounts have the most liquidity, although you’ll be earning little to no interest. Savings accounts are also different from investment accounts, which compromises of cash, stocks, and mutual funds, but don’t guarantee your money.

Deposit savings accounts

Deposit savings account, otherwise known as transaction savings account, is the simplest form of savings that allows you to deposit funds and earn interest. This account also doesn’t have a large minimum deposit, therefore making your minimum deposit fees easy to maintain.

Deposit savings accounts also have high liquidity; meaning you can effortlessly transfer money to your checking account to make payments. By contacting your financial institute, you can link your transaction savings account to the debit card associated with your checking account. Transaction savings account have lower interest rates as a result of increased liquidity.

Want to learn more about saving and checking accounts? Find out more here!

Term Deposit

Term Deposit accounts provide a high fixed interest rate in exchange for locking in a certain amount of money for a fixed period. This account acts as a tool that helps grow your wealth and can be invested into a financial institute, building society or credit union. Therefore, this type of account is best suited for investors who prefer capital security.

Upon depositing your money for a fixed period of time (ranging from one month to five years), you would be informed that the interested rate will not change for your chosen fixed term. After your fixed term has passed, you will be able to withdraw your money. You may still withdraw funds prior to the end of the period, but penalties will apply.

Online Savings

An online savings account is used for saving money on a long term basis in exchange for interest rates annually. It’s also primarily managed online. You can either open an online savings account with traditional banks, as well as online-only banking providers.

Online savings accounts offer competitive rates compared to other accounts, and that’s due to online banks not having overhead costs. This means you’ll be earning high interest and low fees. It’s important to note that due to having an online account, you will most likely not have a debit card. Therefore will not be able to withdraw fund from ATM’s or over the counter.

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