What Is a Linked Savings Account?
Let me explain what a linked savings account really is. It's essentially a savings account that's tied directly to another account, like your checking or a negotiable order of withdrawal (NOW) account. I find that these are usually at the same bank where you hold your other accounts, which simplifies transferring money between them.
How Linked Savings Accounts Work
When you open one of these linked savings accounts, the bank connects it by account number to your existing or new checking or NOW account in their system. This setup makes transferring money straightforward, which is handy if you're trying to build up your savings. Sometimes these are referred to as packaged accounts, and you'll see the balances from both reported on one consolidated statement, helping you track everything without hassle.
What I appreciate about them is how they let you park most of your money in the savings account, where it might earn better interest, and just move what you need into checking. Some banks even throw in perks like reduced fees or free checking to sweeten the deal.
Special Considerations
You can link other accounts too, like a certificate of deposit (CD), to your main ones. Banks often push this by offering benefits such as higher interest rates if you keep depositing and maintaining those accounts.
Be aware, though, that linking isn't always fee-free. For instance, with overdraft protection, the bank might automatically pull from your savings to cover a low checking balance, avoiding overdraft fees—but that transfer itself could cost you. Do this too often, and your savings might dip below the minimum, triggering more fees.
If the best accounts aren't at the same bank, you can link externally. Look for that option; you'll need to provide extra details, and transfers might take longer with monthly limits.
Benefits of Linked Savings Accounts
Banks like these linked setups because they keep more of your money with them longer, often rewarding you with better rates, especially on higher balances. For you, it means simpler management with quick transfers all in one place.
Why You Might Want a Linked Account
Consider this if you want to keep most funds in savings for higher interest, transferring to checking only when necessary. Plus, some linked accounts come with incentives like lower fees or free checking.
What to Watch Out For
Linking can lead to extra fees, especially with automatic transfers for balance maintenance or insufficient funds—each one might cost you. This gets tricky if it drops your savings below the minimum, adding more charges. Also, if you close an account or switch banks, unlinking adds an extra step.
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