How Savings Accounts Works?

Savings and other deposit accounts are valuable resources that financial organizations can use to lend to others. As a result, savings accounts are available at almost every bank or credit union, whether they are traditional brick-and-mortar establishments or only function online. Savings accounts are also available at several investing and trading businesses.
A savings account’s interest rate is often changeable. Banks and credit unions can typically raise or reduce their savings account rates at any time, with the exception of campaigns that promise a set rate until a specific date. The more competitive a rate is, the more likely it is to change over time.
Institutions may modify their deposit rates in response to changes in the federal funds rate. Also worth looking into are special high-yield savings accounts offered by select banks.

The most common type of bank account, and probably the first account you’ll ever have (after a checking account), is a savings account. Savings accounts allow you to keep your money in a safe place while it earns a small amount of interest each month.

  • You open a savings account at the bank.

  • The bank pays you interest on the money that you deposit and leave in that account.

  • The bank then loans that money out to other people, only they charge a slightly higher interest rate on the loan than what they pay you for your account.

The difference in interest they pay you verses the interest they charge others is part of how they stay in business.