Key terms everyone with a savings account should know

In the world of personal finance, the jargon associated with various banking products can be bewildering. However, understanding these terms—such as APY, ATM networks, and maturity date—can lead to significant savings.
Types of Savings Accounts
Savings accounts come in several forms:
- Brick-and-Mortar Savings Accounts: Offered by banks with physical branch locations for in-person banking.
- High-Yield Savings Accounts: Typically available at online-only banks, offering higher interest rates and lower fees due to reduced overhead costs.
- Certificates of Deposit (CDs): Fixed-term, high-interest accounts.
- Money Market Accounts: Often come with higher interest rates and check-writing privileges.
Regardless of the account type, understanding key terms is essential.
Savings Account Terms You Need to Know
- ACH Transfer
- Electronic payments for direct deposits, automated bill payments, etc. These transfers are usually free but take at least one business day to complete.
- Annual Percentage Yield (APY)
- The interest rate earned in a year. Knowing the APY helps gauge the earning potential of your savings.
- ATM Networks
- ATMs can be in-network or out-of-network. Using an out-of-network ATM usually incurs fees from both the ATM operator and your bank.
- Balance
- The amount of money in your savings account. It changes with withdrawals, deposits, or accrued interest. CDs often require a minimum deposit as your balance.
- CD Ladder
- A strategy to maximize earnings by investing in CDs with different term lengths, allowing regular access to funds while benefiting from varying interest rates.
- CD Term Length
- The duration for which your money is invested in a CD, ranging from three months to five years. Longer terms usually offer higher APYs.
- Early Withdrawal Penalty
- Penalties for accessing funds before the CD term ends, often costing the interest earned or that would have been earned over a period.
- Fixed APY
- CDs offer a fixed APY that remains constant throughout the term, unlike variable APYs in other savings accounts.
- Grace Period
- The days following a CD term’s end during which you can withdraw or deposit funds without penalty. For example, BrioDirect High-Rate CD offers a 7-day grace period.
- Maturity Date
- The end date of a CD term when you can withdraw funds penalty-free. Options include withdrawing, renewing the term, or transferring to a new CD.
- Mobile Deposit
- Depositing checks using a mobile banking app. Funds are usually accessible within a day or two.
- Wire Transfer
- Moving funds from one bank account to another with same-day availability, typically for a fee.
Bottom Line
Understanding these key terms is crucial when managing a savings account. Take the time to familiarize yourself with them to avoid unnecessary fees and make the most of your savings.