Advantages and Disadvantages of Savings Account
Most people when selecting an investment option, only focus on the advantages related to the option. But to make an informed investment decision, it is very important to know the good as well as the bad of the option you select.
While the advantages of savings account are plenty, there are also a few drawbacks too that you should know about before opening a new account. Some of the most important advantages and disadvantages of savings account are discussed below-
1. Earn Interest
A savings account helps you earn interest on the deposited amount. To attract new customers, banks now offer higher interest rates and a host of other benefits such as discounts on locker rentals, unlimited ATM transactions, and more. Moreover, some of the banks also offer many different types of savings account to meet the different needs of the customers.
2. Safest Investment Option
One of the biggest advantages of saving account is unlike most other investment options, a savings bank account does not invest your money but still offers modest returns. All you need to do is to deposit money in your savings account to take advantage of this feature.
3. Minimum Investment Amount
Browse through the different investment options and you’ll see that a savings account is also the most affordable. You are simply required to keep the minimum balance in your account to keep earning interest. This minimum deposit amount can be different for every bank.
1. Interest Rates Can Change
One important disadvantage of a savings bank account is that the interest rates offered by the bank are variable. This means that the bank has the right to make changes to the interest rate. While the changes are generally minimal, it is possible that the interest rate of a savings account now can be lower 6 months down the line.
2. Easy Access
While easy access to funds is seen as one of the most important features of savings account, it can also work as a disadvantage for some people. As these accounts allow you to access your funds anytime you like, people are more tempted to spend. This can make long-term savings challenging.
3. Minimum Balance Requirement
When you open a savings bank account, you’ll be required to maintain a minimum average balance in your account. If you fail to maintain this balance, the bank charges a penalty for the same. So, before opening an account, make sure that you check the minimum balance requirements of the bank and always maintain this balance to avoid the penalty.
Is a Savings Account the Right Option for You?
Now that you know the savings account advantages and disadvantages, you can now easily decide whether or not it is the right investment option for you.
If you plan to go ahead with the savings account, make sure that you check the interest rate offered by the bank and other terms and conditions to enjoy a hassle-free experience.
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