Savings account

Features

Obtaining funds held in a savings account may not be as convenient as from a demand account. For example, one may need to visit an ATM or bank branch, instead of writing a cheque or using a debit card. However, this transference is easy enough that savings accounts are often termed near money.

Some savings accounts require funds to be kept on deposit for a minimum length of time, but most permit unlimited access to funds. True savings accounts do not offer cheque-writing privileges, although many institutions will call "savings accounts" their higher-interest demand accounts or money market accounts.

All savings accounts offer itemized lists of all financial transactions, traditionally through a passbook, but also through a bank statement.

Growth

With the advent of the Internet, high yield savings accounts have become more prevalent from virtual banks. ING Direct was the first online high yield savings account provider, beginning operations in the United States in 2000 and expanding to Australia, Canada, France, Germany, Spain, and the United Kingdom. ING's business model is to pay competitive rates (though not necessarily the highest in each market) while maintaining very few retail locations and keeping customer service costs low through automated and computer systems. The growth of online high yield accounts have pushed many brick and mortar banks to create their own high yield savings accounts.

Regulations

In the United States, under Regulation D, 12 CFR 204.2(d)(2), the term "savings deposit" includes a deposit or an account that meets the requirements of Sec. 204.2(d)(1) and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor is permitted or authorized to make up to six transfers or withdrawals per month or statement cycle of at least four weeks. The depository institution may authorize up to three of these six transfers to be made by check, draft, debit card, or similar order drawn by the depositor and payable to third parties.

Within most European countries interest paid on deposit accounts is taxed at source. The high rates of some countries has lead to the development of a significant offshore savings industry. The European Union Savings Directive has made arrangements with many offshore financial centres for either information on interest earned to be shared with EU tax authorities or for withholding tax to be deducted on interest paid on offshore accounts, because of concerns relating to potential tax evasion. Account holders must either pay the withholding tax or disclose account holder information to relevant tax authorities.

Costs

Withdrawals from a savings account are occasionally costly and are sometimes much higher and more time-consuming than the same financial transaction being performed on a demand account. However, most savings accounts do not limit withdrawals, unlike certificates of deposit. In the United States, violations of Regulation D often involve a service charge, or even a downgrade of the account to a checking account. With online accounts, the main penalty is the time required for the Automated Clearing House to transfer funds from the online account to a "brick and mortar" bank where it can be easily accessed. During the period between when funds are withdrawn from the online bank and transferred to the local bank, no interest is earned.

In some countries, such as the United Kingdom, an account called the "notice deposit" account is available. A slight interest premium is paid, with the caveat that one must give up to 90 days notice to make a withdrawal without a fee. Often, withdrawals can be made without notice by paying a penalty equivalent to the interest earned in the notice period. This is in contrast to "instant access deposit" accounts, which do not require notice for withdrawals. Notice deposit accounts are not common in North America.

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