Characteristics of Savings Accounts

The Consumer Federation of America released an interesting report on savings accounts. The report is titled, "Savings Accounts: Their Characteristics and Usefulness." Savings account types include statement, passbook, and club savings accounts, money market accounts, and for credit unions, share savings accounts. About 59 percent of American households hold some kind of savings account.

The median amount of money held in a savings account is $4,200. There are over 14,000 financial institutions that offer some type of deposit account. The median amount held in a traditional savings account is much lower at $2,400 while the median amount in money market accounts is much higher at $10,000.

Considering how low savings account rates and money market rates are right now, it's surprising that people are even bothering to keep money in these accounts. A better option would be putting your money in a certificate of deposit account.

Average savings account rates/money market account rates right now are at 0.47 percent while average 1 year CD rates are higher at 1.97 percent. Granted, rates on all deposit accounts are low right now. You won't get rich off of the interest but at least you get a higher rate with a CD account.

Largest Percentage Have Traditional Savings Accounts

Breaking down the 59 percent of households that hold some type of savings account, 49 percent hold a traditional savings account while only 17 percent hold a money market account. The smallest percentage of these households (only 0.04 percent) hold some type of savings goal account like a Christmas club account.

The report also breaks down the age distribution of traditional savings account ownership. A higher percentage of those under 65 have a savings account than over 65.

Slightly more than half of those age 35 to 55 have a savings account. Only 42 percent of those over age 65 have a savings account. A driving factor behind this may be the fact that deposit rates are so low and retirees are investing in other interest-bearing assets to get a better return.

Majority of Banks Require only $100 to Open an Account but $200 to Avoid Monthly Fees

This tidbit of information smacks of greedy bankers taking advantage of the unwary consumer. A large majority of banks (89 percent) allow consumers to open a savings account for $100 or less. However, 59 percent of banks require a minimum balance of $200 in order to avoid monthly account fees.

Half of the large banks require at least a $300 minimum monthly balance. On the low end, one fifth of the banks require only a $50 minimum deposit. The average monthly account fee isn't much, on average about $3.30. The largest fee amounts are at the largest banks averaging $3.90 a month. The lowest fees are at the smallest institutions averaging $2.30.

While fees are low, interest rates are also low. Fewer than half pay a rate of 0.10 percent or higher. With the average savings account balance at $4,200, earning an average rate of 0.10 percent, most of the interest earned would be eaten up by account fees.

Some Banks Offer Higher Savings Rates by Maintaining a Checking Account

Banks offer incentives such as higher savings account rates by also maintaining a checking account. Setting up automatic transfers from a checking account to a savings account can also earn you a higher rate.

You can also get a higher rate on a savings by having a checking account tied to the savings account. Another option to earn a higher rate is setting up direct deposit setup on an account.

There is a lot more interesting information in the report including information on credit union savings accounts. You can read more in the Consumer Federation of America's report.