Singapore is currently experiencing amazing financial growth, even after a worldwide economic crunch. The standing of the Singapore banking system is better compared to that of its Asian neighbors. Interest rates in Singapore banks are stable and expectedly better than its regional neighbors. It seems obvious that the time is ripe for one to consider opening a savings account in Singapore. Considering the economic climate, it is best to be ready financially, and a savings account can assist you here wonderfully.
A savings account offers relatively easy access to money while earning interest as it sits in a bank. Compared to a current account, the savings account may not boast of accessibility or the function for overdraft. It isn’t a checking account, so a savings account holder will not be able to pay using a check. However, it does offer a better interest rate, considering that a current account may not even offer an interest rate at all Also, compared to other financial options, such as the fixed deposit account, it offers significantly better access. Essentially, a savings account is used to keep a monetary asset and to earn interest from it.
Savings account versus current account
A savings account is considered as a more basic type of banking account, while a current account is reserved for the high earners and the frequent bank clients. This is only expected, considering the nature of a current account. Current accounts may require a higher initial deposit. The features of a current account also fit an entrepreneur or a business owner well.
Merchants use a current account, linked to their merchant accounts – which is an account that allows the merchant to process credit card transactions. Businessmen also use a current account to send out funds for their employees. Since funds in current accounts often move frequently, it doesn’t have the opportunity to gain interest.
The idea of a savings account is implied in its name: to save money. Savings account holders are expect to save a good portion of their funds in their accounts -- which means they wouldn’t move the money any time soon. Because of this, the funds can earn interest, which leads to the account holder receiving monetary gain.
The purpose of a savings account is intrinsically different from that of the purpose of a current account.
So why should anyone choose to place his funds in a savings account when it does not offer the accessibility of a current account and the interest rate of a fixed deposit account? The answer is quite simple, because the savings account works as an in-between.
With a fixed deposit account, you will be charged a hefty sum when you withdraw your funds --even if only partially, before the maturity date. In terms of monetary gain, the fixed deposit account is superior. But if you’re looking for accessibility and flexibility with an interest rate, the savings account is a better option.
The characteristics of a good savings account
Before choosing a savings account, you need to know what makes a savings account a good savings account.
First is accessibility. Your savings account should allow you to at least withdraw and deposit funds with ease. Remember that a standard savings account is not a fixed deposit account, so you shouldn’t have any trouble with funds movement.
The major issue here is withdrawal restrictions. A good savings account will allow you to withdraw money regardless of amount and frequency. A number of banks only allow a specific number of withdrawals per month. Once you exceed, you will be charged a small fee. This fee may seem insignificant, but it could end up becoming a considerable when accumulated. Restrictions on the amount of money you can withdraw per day from your savings account are common. In fact, this can serve as a security tool in case someone fraudulently tries to withdraw all your savings. At least, you can place a cap on fraudulent withdrawals.
The flexibility of a current account does not only pertain to how it receives and makes payments, it also refers to the amount of money you can receive and withdraw using the account. If you plan to make regular daily withdrawals beyond the limit of a savings account, it might be better to consider a current account instead.
The interest rate is another consideration. Make sure the interest rate offered on your savings account is competitive. The actual concern here is the presence of an introductory rate. The interest rate of your account may be high for the first two years, but it would fall significantly after. This is because the rate for the first two years is merely an introductory rate. Make sure the rate after the introductory period remains to be competitive.
For maximum monetary gain, you may want to consider a frequent saver savings account. This type of account offers the best interest rates, but it may have a few limitations. This account may set several restrictions on withdrawals and may charge you a hefty sum once you exceed the limits. It may also require you to deposit a specific amount every month.
This type of savings account is a good option for those planning to seriously save money, but do take note of the repercussions. Banks may decrease your interest rate if you fail to deposit the required monthly amount. Take note of withdrawal restrictions as well, as it may prove to be stricter. Ask yourself if you can commit to the monthly deposits.
While somewhat minor, check whether the account will allow different forms of funds deposit. Some accounts allow check deposits while others do not. Some savings accounts allow fund transfer to and from your account, others may allow it, but for a fee. Consider a savings account as a somewhat stricter wallet. It does not offer cash fluidity, but it does not fully restrict cash flow.