You probably know that credit unions and banks offer checking accounts and savings accounts. What you might not know, however, is how many different types of savings accounts are available.
Traditional Savings Accounts
Every bank and credit union offers savings accounts. These accounts earn interest, although it may not be as much as an investment vehicle. With savings accounts, federal law limits you to six withdrawals or transfers each month, but you can get around that limit if you visit your financial institution’s tellers or their ATMs.
Traditional savings accounts have two notable variations: jumbo savings accounts and high interest savings accounts.
Jumbo savings accounts are what some financial institutions call savings accounts with a deposit of over $100,000, and they may pay a higher interest rate on these accounts.
High interest savings accounts are similar to jumbo savings accounts. Financial institutions which offer these types of accounts may require a high minimum balance, but anyone who meets the minimum requirements can expect to get a relatively high interest in return, usually over 2%.
A money market account is another type of savings account with a higher interest rate than a traditional savings account. In order to qualify and avoid fees, though, you may need a minimum balance of at least $1,000.
Joint Savings Accounts
A joint savings account is a savings account owned by two or more people. In most respects it is similar to a standard savings account, but there is one big difference. Since it's owned by at least two people, the NCUA (for credit unions) and the FDIC (for banks) multiplies the insurance limit of the account (about $250,000) by the number of owners in the account. This makes it an ideal account if you'd like to save up for big purchases.
If you have a specific savings goal in mind, like Christmas shopping or a vacation trip, a club account can help you save money throughout the year. Club accounts have a specific date when the balance and dividends are transferred to your checking or savings account in order to help with specific purchases. Club accounts also typically offer higher interest rates than traditional savings accounts.
Rewards Savings Accounts
A rewards savings account, like First Alliance Credit Union's WINcentive account, offers the chance to win rewards if you reach certain financial goals. In the case of WINcentive, for every $25 month-over-month increase in your balance, you get one entry into a monthly, quarterly and annual state prize drawing for cash.
Rewards savings accounts can be very useful if you need an incentive to save money. You can also use the rewards themselves to further reach your savings goals. Make sure, though, that the interest rate on the rewards savings accounts is competitive with regular savings accounts.
Youth and Teen Savings Accounts
Most financial institutions offer savings accounts designed with younger people in mind. They usually have more flexible terms than regular savings, such as a lower minimum balance requirement.
Health Savings Accounts
Medical treatment is expensive. A health savings account can help take the sting out of the bill at the end, though. The contribution you make to this account is tax-deductible and you pay no tax so long as you use the money for a qualifying medical expense. The only requirement for opening this kind of savings account is that you have to be enrolled in a health plan with a high deductible.
College Savings Accounts (529 Plans)
This type of plan is used to pay for the expenses associated with higher education, such as tuition, room and board, books and other materials. Deposits to the account are not tax deductible, but withdrawals are so long as they're used for education expenses that qualify.
Start a Savings Account at First Alliance Credit Union
When you decide to start saving, you have a lot of options open to you. If you need help figuring out which option is best for meeting your goals, contact First Alliance Credit Union member services. Our advisors will help you figure out the type of savings account that works best for your goals.