Savings Rates: How Banks Pay their Debts

2007-03-08 10:33:40

( Financial )



SAVE THAT SPARE CASH

When you have extra cash to spare, the money is better kept in banks because it is safe and earns interests in the form of savings rates. Savings rates are the basis from which your money earns. From savings rates your interest is then computed and credited to your account on a monthly period.

There are many types of savings account that you can open, and there are as many corresponding savings rates as well. Usually, banks require a minimum balance amount that must be maintained in your savings account for it to earn savings rates. As a rule of thumb, a higher minimum maintaining balance has higher savings rates as well – the more money you save in the bank, the higher the interests it will earn.

SAVE MORE, EARN MORE

Generally, the highest savings rates are for trust accounts or for time-savings accounts. These types of savings accounts require bigger amounts of money to be deposited and must be kept in the bank for a specific period of time. This means that initial value of the account cannot decrease – you can make deposits but you cannot withdraw from the principal amount, only from the interest that the account earns.

The savings rates for these types of accounts are usually guaranteed or locked-in regardless of fluctuations in prevailing interest rates. Interest rates are very susceptible to market trends and can go up and down frequently. If your savings rates are fixed then it is protected from low rates when the market is on a downtrend.

Your savings account has savings rates because it is the banks way of repaying you for using your money to generate more business. The main source of funds for banks is the savings accounts. This is where banks get the money to provide other people with loan and mortgage services.


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