Compare Saving Accounts And Earn More Interests

2007-03-08 10:33:40

( Financial )



When you think of saving money, you normally think of savings account. You would want to deposit your money with a bank that offers the best savings account. To find the highest savings account, you shop and compare saving accounts rate.

When you compare saving accounts, also consider the required minimum balance, service fees when you fall below the minimum balance and method used to compute the average balance.

Minimum balance

It is common for banks to require a minimum balance before the interest is paid. The interest paid on a savings account varies from bank to bank. If you can only afford a relatively low minimum balance, you can find a savings institution (other than banks) that accepts lower amounts.

Service Fees

Banks levy service fees or maintenance charges if you cannot maintain the required minimum balance. It is possible that the fees are bigger than the interest credited on your savings account. If this happens, the balance in your account can actually decline. Make sure that you carefully read the fine print for any applicable fees.

Computation Method Used

Average daily balance (ADB) method takes the balance in the account each day of the month, adds them all up, and divides by the month’s number of days.

Largest continuous balance (LCB) method determines the largest amount that has remained in the account for the entire month. This is the smallest balance on any day during the month.

Savings account using ADB rather than LCB method pays more in interest given the same stated interest rate if deposits and withdrawals are made during a compounding period. Otherwise, both methods result in the same number.

Most banks emphasize the interest paid on savings accounts, while the method used to compute the average balance is written in fine print. Make sure that you understand these methods when you compare saving accounts rate.


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