The service of modern banks includes various types of financial services related to cash deposits of various specificities.
One such area of banking allows clients of these institutions to accumulate funds. This is a simplified version of a deposit, known as a savings account.
The specifics and varieties of the relevant type of service, the conditions for its opening and use, and key advantages - all these relevant points are explained below.
What is a savings account?
Many bank customers choose the option of receiving higher interest on a permanent cash balance that can be withdrawn when needed, that is, at any time.
Such convenient and advantageous conditions for the client of the banking institution are provided by opening a savings account.
Savings account – is a bank deposit that allows the depositor not only to receive interest income, but also to withdraw part of the deposit up to its minimum amount.
Relatively recently, this service, which involves simultaneous investment and increase in free funds, has become a more popular alternative to deposits, which were the only option for such a service for decades.
But savings account has an obvious advantage compared to making a deposit - the conditions of the latter do not allow for free disposal of funds.
Nowadays, commercial banks in Ukraine offer their depositors to open a savings account in the national currency (in hryvnias) or foreign currency, including euros and US dollars.
Such a practical, flexible and convenient financial instrument guarantees the investor several opportunities:
- receiving increased interest on the permanent balance of the amount of money even if the funds were withdrawn;
- free cash deposit and withdrawal;
- making automatic transactions, transfers from a current account to a savings account;
- variability of the terms of storing funds - this period can range from 1 month or several months to a year or many years.
The right to replenish the savings account remains with the client, as well as the choice of amounts for these financial options. It is possible not to replenish this savings account at all. In any case, its owner will be able to withdraw funds without penalties, while receiving a small but stable passive income from interest.
How does a savings account differ from a deposit?
Both of these concepts refer to banking instruments whose purpose is to save money and receive interest on it.
A deposit is a form of deposit with a fixed term and a fixed interest rate. This means that its owner, who has deposited a certain amount in the bank before the end of the deposit agreement, has no right to withdraw the corresponding funds. And the amount of interest accrued on it is paid only when the agreement expires.
The ability for a client to deposit and withdraw money at any time is something that How does a savings account differ from other accounts?, including the deposit.
There are several other differences between such a relevant banking product and an alternative deposit, related to the user's needs and the financial strategy he prefers:
- a savings account can be replenished in several steps, depositing the amounts chosen by its owner (and the deposit is made once, and this is a specific amount);
- if you withdraw funds from a savings account, the interest is not lost (and early closure of the deposit, as a rule, leads to the loss of interest accruals);
- The interest rate provided by the deposit is often higher, but the terms of the specific agreement are important here, including its term and the possibility of terminating the agreement before the end of the term specified in the agreement.
Since the features of such a service are different in different financial institutions, to find out, What is a savings account in a bank? specific and what conditions for providing this service he puts forward, you should contact the managers of the relevant institution.
Features of a savings account
One of the key conditions for using such a financial product is the absence of restrictions on withdrawing money from the account.
In this case, accrued interest is not lost.
Different banking institutions provide different interest rates for their respective depositors. Its range can be from 2% to 6.5%.
Each financial institution offers its own terms for accruing such “bonuses.” For example, they can be accrued daily or once a month.
It should be noted that banks usually position such an interest rate without taking into account taxation. And according to current legislation, this amount is reduced by 18.5% after deducting personal income tax and 1.5%, which is provided for by military levy.
This means that the actual amount of the above interest rate is from 1.6% to 5.2%.
Advantages of a savings account
There are four basic advantages of this banking product that have made it so popular.
- Accessibility for all clients. In this case, age, income, and specific credit history do not matter.
- The possibility of increasing cash savings through interest accrued on the balance of funds.
- Flexible and convenient terms of use. This means that the owner of the funds can withdraw them and increase the amount in the savings account when and in the amounts he needs.
- Using a savings account is simple. Opening it and managing this financial instrument does not require any special skills or abilities.
The only nuance of using such a financial and banking service is the possibility that the depositor will lose his money if the bank goes bankrupt and his accounts are not covered by state insurance.
How to open a savings account correctly?
Such a responsible decision requires primary attention to two points.
- Choosing a savings account type. Currently, banks offer such products of the classic type, with a fixed or increased interest rate and with additional features. For example, the classic option provides for depositing and withdrawing money at any time and an annual interest rate from 0.5 to 2%.
- The purpose of the deposit and plans for using the accumulated amount. For example, if the goal of the depositor is to protect his savings from inflation, you should choose an instrument with the ability to withdraw and replenish the account at any time. But in this case, you should not count on the maximum income from the deposit, because the rate will be small. Therefore, this solution is not the best for investments.
In addition, users who are interested in how to open a savings account, all conditions associated with the relevant decision should be taken into account, namely:
- the amount of the interest rate – the profit received from this banking product (the higher the rate, the greater the profit of the account holder);
- terms – in a savings account, unlike a deposit, they are not limited;
- withdrawal conditions – in some cases, bank customers have to choose between a higher interest rate and the ability to freely withdraw cash (but this applies more to deposits);
- methods of accruing interest – this process can be daily or performed once a month.
To open a savings account for an individual, an applicant for such a service should contact a convenient branch of a banking institution.
You need to have a minimum package of documents with you, which includes a passport of a citizen of Ukraine and a certificate of TIN. Sometimes there is a need to provide additional documents for the service - these points are clarified with an authorized bank employee.
Nowadays, consultation about steps to open a savings account and the specifics of each of them can be obtained by telephone or by filling out a special form online on the banking institution's portal.
Most banking transactions can now be performed using online banking or a corresponding mobile application, pre-downloaded and installed on a smartphone or other gadget.
Who is a savings account suitable for?
This solution is chosen by people who want to withdraw money for a specific, specific purchase, imperceptibly saving a certain part of their income for it.
It is preferred by those who want to withdraw and deposit funds freely and without restrictions, are looking for a small passive income, and are concerned about protecting their savings from inflation.
This is also a good option for bank clients who are planning a significant purchase in the coming months, but do not want the funds to sit idle in their account until then.
Can I withdraw money from a savings account?
Yes, the corresponding option is possible. In this case, the account holder does not lose interest. A deposit does not give its owner such rights.
Is there a limit to the amount that can be saved?
No, there are no such restrictions. However, there are currently restrictions on cash withdrawals, and they are due to martial law. The corresponding limit is 100 thousand hryvnias per day.
At the same time, there are several exceptions to this rule, which should be clarified with the competent employees of financial institutions.
How does the interest rate change over time?
The amount of accrued interest may be changed by the bank itself, but this rate cannot be less than 2% and greater than 6.5%.
How to choose the most profitable savings account?
It is necessary to consider the terms of the withdrawal service offered by the top banks of Ukraine. For example, as of last year, the most favorable terms for a classic savings account were offered by Kreditbank and A-Bank (2.2% and 2.2%, respectively).
At the same time, some banks have introduced savings accounts with higher interest rates.
Thus, under the terms of the relevant service, PrivatBank provided 3% per annum if the amount of savings exceeded 100 thousand hryvnias and was replenished by 10 thousand hryvnias monthly. And Ukrsibbank offered an annual rate of 5% for the amount of accumulated funds from 50 thousand and its monthly increase by 5 thousand units of national currency.
About all aspects and current packages of the relevant banking service and about How to earn interest on a savings account, you should check with the financial institution that provides this service.
