What Is a Linked Savings Account?
A linked savings account is a type of savings account that is connected to another account, such as a checking or negotiable order of withdrawal (NOW) account. These accounts are typically held at the same bank, facilitating easy fund transfers between accounts.
Key Takeaways:
- Linked savings accounts are connected to another account, making fund transfers convenient.
- Linked accounts are sometimes referred to as packaged accounts.
- The balances of both linked accounts are usually consolidated into a single statement.
How Linked Savings Accounts Work
When setting up a linked savings account, the bank connects it to a checking or NOW account by account number. This connection simplifies money transfers, making it convenient for individuals looking to build their savings.
Linked accounts, also known as packaged accounts, consolidate balances on a single statement. This consolidation helps customers monitor their finances efficiently. Additionally, linking accounts allows for optimal fund allocation, with the majority in a high-interest savings account, and moving as needed into the checking or NOW account. Some linked accounts may offer perks like reduced fees or free checking services.
Consolidated statements typically include balances from savings, checking, and other linked accounts.
Special Considerations
In addition to linked savings accounts, a certificate of deposit (CD) can also be combined with other bank accounts. Banks may promote linking multiple accounts by offering benefits such as higher interest rates.
However, linking accounts could lead to extra charges. For instance, overdraft protection may automatically transfer funds between accounts, but this service often incurs fees. Frequent transfers may deplete the savings account minimum balance, triggering additional charges.
When ideal accounts are not available in one bank, customers can link accounts across different banks. This option is useful for those seeking high-yield savings accounts while maintaining checking services elsewhere.
To link external accounts, additional information is required, and the transfer process may be lengthier. Monthly limits could apply to external transfers.
Benefits of Linked Savings Accounts
Banks often incentivize linked savings accounts to retain customers. Higher rates may be offered for maintained balances. Centralizing accounts for quicker transfers streamlines money management.
Why might consumers want to consider a linked account?
Linked savings accounts optimize interest earnings by keeping the majority of funds in a high-interest savings account. Additionally, they offer potential perks like reduced fees or free checking services.
What should you be careful of when opening a linked savings account?
Linking accounts may trigger extra fees, particularly for automatic fund transfers due to insufficient balances or to maintain specific levels. Frequent transfers might cause the savings account to dip below the minimum balance, incurring further charges. Additionally, closing or switching linked accounts can introduce complications.