What Are the Advantages and Disadvantages of a Savings Account?

According to Bankrate, advantages of a savings account include money liquidity, money safety, and multiple withdrawal options; disadvantages include interest rates that are usually lower than these of CDs and other investment options and the relatively high minimum balances mandatory on some savings accounts. On the other hand, many are available with low minimum balances. A person may need only $1 to open a savings account.

Savings accounts with online-only banks, according to Bankrate, may have higher interest rates than banks with physical presences because online banks do not need to account for physical overhead. Savings accounts generally do not make as much money in the long term as other types of investments, but they carry virtually no risk at all. Money in bank savings accounts up to $250,000 is insured by the federal government. Credit-union savings accounts up to $250,000 are insured by the National Credit Union Share Insurance Fund. Bankrate explains that a savings account is very advantageous if it serves as an emergency fund or as a place to stockpile money that must be kept liquid. If a customer does not keep up with any monthly minimum balance for a savings account, she may be charged a fee.